Correction to This Article
This article incorrectly said that a French and Japanese conglomerate signed on to help build the country's uranium-enrichment facilities. Two conglomerates, one French and one Japanese, are involved.
Page 2 of 2   <      

In Kazakhstan, the race for uranium goes nuclear

As global demand for nuclear energy rises, Kazakhstan sees a future for its large uranium reserves. But the country is still struggling to make sense of the role uranium played in its past.

"Nothing good can come of the world's push for nuclear energy, and we should understand this better because of our past," said Mels Eleusizov, a veteran environmentalist who complains that the uranium industry is shrouded in secrecy, with no independent monitoring.

Kazatomprom and its foreign partners mine uranium primarily by injecting sulfuric acid into the ground, where it reacts with the ore. The solution is then pumped into a plant that distills it into a powder known as yellowcake. The process is cheaper than traditional pit mining, and officials say it is safer and cleaner.

Before his arrest, Dzhakishev struck a series of deals giving foreign firms access to uranium mines in exchange for help moving Kazakhstan into higher-end segments of the nuclear fuel cycle. Each made Kazakhstan less dependent on Russia, its traditional partner in the industry.

The Canadian mining giant Cameco agreed to establish a joint plant to prepare yellowcake for enrichment, the process that makes uranium capable of sustaining a nuclear chain reaction. A French and Japanese conglomerate signed on to help build the facilities that turn enriched uranium into fuel rods. Kazatomprom also landed agreements to become China's main supplier of nuclear fuel, and its Westinghouse stake gave it a piece of the reactor-construction business.

"The inducement for all of us to cooperate is access to the uranium resources and building that relationship with Kazatomprom," said Jerry Grandey, Cameco's president and chief executive.

Kazakhstan continued to rely on Russia for uranium enrichment, the most sensitive fuel stage because of proliferation risks, and the two nations began work on a joint enrichment facility in Siberia. They also opened talks to create a market goliath uniting Kazakh uranium and access to markets with Russian technology and facilities. The talks stalled, though, apparently over whether Kazakhstan would be an equal partner or a junior one.

In the leaked video, Dzhakishev said Russia began to pursue deals to edge Kazakhstan out of the Japanese market and guarantee a uranium supply through a Canadian producer, Uranium One. But he said he outmaneuvered Russia by persuading Japanese partners to take a blocking position in Uranium One and insist on a Kazakh role in the Japanese market.

In a sign of Moscow's frustration, Russian officials approached one of Dzhakishev's vice presidents and offered to help him oust his boss, according to a former Kazatomprom executive, who spoke on the condition of anonymity for fear of reprisals. But the vice president rejected the plan.

When the KNB began investigating Kazatomprom, Dzhakishev blamed officials who he said were upset at him for refusing to give them contracts or mining rights, friends said. Among those he had rebuffed was the powerful KNB chief himself, Amangeldy Shabdarbayev, according to Dzhakishev's brother, Yermek.

As the probe dragged on, Dzhakishev worried he had fallen out with Nazarbayev. Dzhakishev's wife, Zhamilya, said he declared his loyalty to the president in a May meeting and distanced himself from two old friends and Nazarbayev foes -- the president's exiled son-in-law, Rakhat Aliyev, and the tycoon Mukhtar Ablyazov, who had fled the country and accused Nazarbayev of stealing his business, Kazakhstan's largest bank.

Nazarbayev assured Dzhakishev that "everything would be fine," Zhamilya said. But two weeks later, on May 21, the KNB detained him and seven of his top executives. In a documentary on national television, the agency cast him as mastermind of a scheme to sell the nation's uranium to foreigners for personal profit.

The arrest unnerved Kazatomprom's partners and prompted a rare protest from the country's leading businessmen, who issued a letter defending Dzhakishev as a smart, honest entrepreneur. He had friends inside government, too; newspapers soon obtained documents showing that senior officials had approved his deals.

The KNB video was the most astonishing leak. Dzhakishev came across as worried about losing business in Japan and China more than losing his freedom, warning that Kazakhstan would be Russia's "raw materials appendage."

In a sensational news conference last month, Dzhakishev's wife asserted that the KNB chief personally passed her a copy of the video before it appeared on the Web and urged her to show it to the president. Shabdarbayev denied the claim but was removed from his job five days later.

Many of Dzhakishev's defenders said Russian agents manipulated Nazarbayev into approving his arrest. Others say he fell victim to a fight within the elite over uranium riches, and Russia just happened to benefit. He is languishing in a secret KNB prison, where his health has deteriorated sharply, his attorneys said.

Nazarbayev, meanwhile, has appointed a veteran bureaucrat to replace him; the official's son-in-law is chief of Russia's state uranium supplier.

Kazakh regulators recently approved the Uranium One deal that Dzhakishev opposed. "Everything that Mukhtar worked out, we can forget about now," said Galym Nazarov, Kazatomprom's former treasurer. "Gradually, Russia is replacing us in the market."


<       2

© 2010 The Washington Post Company