Kang Nam Returning to Port?, Don’t Celebrate too Quickly

Yesterday the New York Timesreported that the Obama administration had judged that there was a high likelihood that the North Korean freighter, Kang Nam, was probably just leading the US on a wild goose chase. In other words, that the rusty ship probably had no illicit cargo onboard, and was hoping that it could draw the US or one of America’s allies into the embarrasing position of searching the boat only to find no booty. (See: http://www.nytimes.com/2009/07/01/world/asia/01sanger.html?hp)

The US Navy has been tracking and monitoring the ship’s movements since it left North Korean waters, and it had earlier been speculated that the ship might contain a small arms shipment for Burma. The question has been whether UN Security Council Resolution 1874 that encourages states to board and search North Korean vessels suspected of violating the arms export embargo would be put to the test. The DPRK had said it would consider such a search a violation of its sovereignty, and an act of war.  (See: http://www.un.org/News/Press/docs/2009/sc9679.doc.htm)

The latest news seems to be that the Kang Nam has turned around, and, for the moment, is headed back in the direction of North Korea. (See: http://www.chicagotribune.com/news/nationworld/chi-tc-nw-briefs-0630-07014jul01,0,3444662.story)

There has been speculation about the rationale for making such a jaunt, but it seems to be a quite beneficial test for the DPRK. I think the little vessel’s voyage is disconcerting. If North Korea wants to ship missiles in order to earn some funds, one of the few ways it is able to, then it would not send those missiles out on the first voyage. Rather, conducting a test is a win – win for the Kim’s. If they don’t get searched, they gain confidence that they won’t be searched in the future – as long as the level of intelligence remains the same. If they had been boarded, they would have also made it hard for the US to repeat the venture in the future without a much higher standard of intelligence. It is true that they would have had to deal with the fact that they had said such a search would be an act of war, but since the Korean War is not legally over, the Kim’s could worm their way out of that threat at low-cost manner.  The question of the day is what happens if the next time the Kang Nam goes out (or the third time or the sixth time) it does have missiles on it. We can’t count on having better information, so at best there is the lucky guess possibility. For those who want to dismiss the Kim dynasty leaders as irrational and incompetent (and I, myself, have certainly had trouble accounting for some behaviors with motives other than childishness or narcissism), consider the masterstroke of this gambit.

Mr. Ahmedinejad, Your [One-Trick] Pony is Dead

The Iranian “President”, Mahmoud Ahmedinejad, in an interesting move, has called for an investigation into the death of Neda Agha-Soltan – the sweet-faced young lady that the world has been watching bleed out on the streets of Tehran  on low resolution footage available through YouTube. I think there is a high probability that his course of action will blow up in the hairy faces of the Iranian leadership.

Let me be the first to predict the investigation’s findings. The Central Intelligence Agency (CIA), possibly in conjunction with Britain’s MI-6, inserted a covert team of snipers that shot the girl in order to stir up trouble. The intelligence agencies of these Western governments decided to to this after they succeeded in an Internet blitz to cast doubt on the legitimacy of Ahmedinejad’s landslide victory.

Now, as I have said in past posts, I am no great believer the predictive ability of even the most revered experts when it comes to the behavior of other humans. However, in this case, I feel safe in that there is only one tack that Ahmedinejad is taking. This song and dance goes roughly like this, there is no significant dissent in Iran. That’s right dissenters, not to mention gays and lesbians, are not indigenously occurring phenomenon within the borders of Iran. Rather , this is all a foreign-led attempt to drive a wedge through the state of Iran so that the imperialists can topple a legitimate government.

This might have been a sound strategy, if anyone were listening. It’s true that there are plenty of Iranians who have reason to resent the United States and Britain. If you happened to be a political prisoner of the Shah or a torture victim of the SAVAK, you might legitimately hold ill-will toward the governments that helped to prop up that regime. Furthermore, whatever America’s involvement was in facilitating a coup against the Iranian Prime Minister Mohammad Mossadeq in 1953, it gives credibility to the claim of imperialistic meddling in Iran’s domestic political affairs. (This is precisely why countries like the US have to have the courage of their convictions to not undermine democratically elected scary governments in favor of friendly, but domestically brutal, dictators. Selective respect for the institutions of democracy and rule of law is a mistake with a long shadow.)  So, given this history, this strategy might be the means to create an “us against them” mentality in the populace that would heal divides. However, no one seems to be taking the rhetoric seriously.

This approach is not working for a couple reasons, I believe. First, it is a young population and they know their experience with an oppressive and, on some fronts [e.g. the economy], incompetent government, but they have only the stories of old-timers about imperial interference in their country (though the perception about operations in Iraq may be a different matter – not that there was any love lost between Iranians and Saddam Hussein.) People weight their own experience more substantially than they do history book chapters. Second, as I have discussed in past posts, it becomes increasingly more difficult each day for tyrants to control the flow of information. We live in an era in which a run-of-the-mill cel phone is a window to the rest of the world.

Given the lack of traction his strategy is achieving, I think that the scripting of investigation results will be a big mistake for Ahmedinejad and the Ayatollah Khamenei. Trying to twist the girl’s death to their own advantage could raise the stakes to a “torch and pitch-fork” level of volitility. Any path Ahmedinejad takes, other than the unlikely route of taking responsibility for the incident and submitting the gunman to legal justice, will further raise animous of the citizenry and reduce the government’s legitimacy. Even if it wasn’t a pro-Ahmedinejad malitiaman that killed Neda Agha-Soltan, the government’s legitimacy is so low that it would impossible to convince the people of it.

There is a lot of debate in the US about what the American approach should be toward Iran. President Obama has argued that if America takes sides, it could only help Ahmedinejad and Khamenei, and I suspect this is correct. Others argue that the US should be supporting Mousavi, but that seems to be the same mistake  we fell into in the 50’s. Regardless of the approach taken, we definitely don’t want to what we did in Hungary in 1956 and Iraq in the 1990’s. That is, we don’t want voices telling the opposition there will be support for bold action, and then failing to follow through. This is another lesson that I hope the US government has learned.

Interesting Times: Iran, North Korea, and US Hegemony

Is Iran on the verge of a revolution? Can Kim Jong Un maintain power if his father transfers it to him in the near future? Are we seeing the leading indicators of America’s decline in conditions like debt that is completely out of control, failing business giants, the crippling costs of persistent asymmetric warfare, and looming unaddressed crises such as the mathematically infeasible pay-go social security system? What will the rise of massive high-growth emerging economies mean for world affairs? What will the world look like politically, economically, and diplomatically 3 months from now?; 6 months?; 1 year?; 2 years?  

We are living in interesting times. We could be on the precipice of some very major changes to the international system. Sometimes change is slow and evolutionary; sometimes it is faster and more revolutionary; and, rarely but occasionally, the conditions evolve to converge to the point where it is catastrophically instantaneous. There is a vigorous tug of war in progress between inertia and the winds of change.

I would love to be able to make some definitive predictions about what the world will look like next year. Like the vast majority of people, I am motivated by discomfort with uncertainty to want to think that I can have a grasp on how events will unfold. However, the lesson (an unintended lesson to be sure) that has most stuck with me in completing graduate degrees in International Relations and Economics  is that anyone who thinks they can predict the future unfolding of large-scale political and economic events is full of crap. This will no doubt be considered heresy to many who have made lucrative livings because we (as a species) would rather pay millions to someone who makes an incorrect prediction than to accept that we have no idea what will transpire. One can read papers that misapply probabilistic and statistical models in some of the most elite scholarly journals because even the most educated of our society are addicted to thinking that the future can be known in a system whose level of complexity remains beyond our capacity to unravel.

My advice to those trying to get a handle on the future, save your soothsayer money, hedge your bets, and enjoy the ride.

Are We Learning the Right Lessons From the Financial Crisis?

With respect to government culpability for the financial crisis, the primary lesson that people have taken away seems to be that the executive and legislative branches were just negligent and did not regulate businesses enough. That is, while business was actively at fault, the government was merely too passive.

It is true that there were certainly specific areas in which the existing incentives created an economically unstable condition, and regulation (and 20/20 hindsight) might have negated the problem. For example, the recently proposed legislation to require loan originators to keep five percent of the loans they make on their books is probably a good idea for new regulation. After all, a major part of the problem was that those who madeloans had no incentive to ensure they were good loans because they were selling them off in securitized form as the ink was still drying on the paperwork. This meant that their only incentive as to make more loans, not good loans.

However, I don’t think we should be quite so quick to conclude that the government’s only role was in failures of omission. The government has long supported the notion that virtually everyone should be homeowners. They supported and implemented policies that facilitated a move toward a greater proportion of home-ownership, and, in doing so, they too are culpable for a condition in which there were way too many people without the incomes to be homeowners who were buying homes.  Until a year ago or so, many people would have thought this a laudable policy, but seeing the effects of having so many people owning homes they cannot afford, we must recognize that the government should not have been supporting housing ownership in the manner it did.

Why is this distinction between active and passive culpability important? My worry is that we seem to be in a period in which people just want government to get off their duffs and be active, and we may not be conscientious enough about whether they are actively doing the right things. No one can say the Obama Administration hasn’t been bold in its policies, but whether it turns out to have been smart in them remains to be seen.

To be frank, I am a little terrified about the idea of a $1.8 trillion deficit for the year. A budget deficit of well over 10% of the entire Gross Domestic Product (GDP) is nothing to take lightly. I certainly hope President Obama will be true to his words to engage in deficit reduction at some point, but I am afraid that like the Republicans, without facing legislative opposition, he will go just as hog-wild as they did. The President certainly has lofty goals, but they all come with price-tags attached.

A Strategic Approach to Ending Human Trafficking

Source: Kay Chernush for US State Department

The State Department’s 2009 Trafficking in Persons (TIP) Report was released on Tuesday (June 16, 2009.) The TIP is part of a laudable effort to fight one of the most heinous stains on the current state of humanity, which is that the buying and selling of human beings continues to take place around the world. Released with the report was an online photo album of pictures taken by Kay Chernush. Most of the photos, like the one above of a Nepalese mother in search of her daughter, show the human dimension of this injustice. 

The idea behind the TIP is simple. States are ranked into tiers according to their level of compliance with a stated set of standards for combating trafficking. Those in the lowest group are subject to possible sanctions in addition to the potential national embarrassment of being seen as one of the most backward countries in the world (and the presumed indirect effects of this status, such as the fact that people are less likely to want to be tourists in, do business with, or generally associate with your country.) The report states that measures with concrete effects like the number of prosecutions, convictions, and length of prison terms are given deference over symbolic activities like conference-hosting or information campaigns in determining in which of the three tiers a nation is placed (compliant, partially compliant, or not compliant).

I do have one potential concern about the TIP report itself. Despite the fact that the report lays out the ranking criteria and discusses methodology (though vaguely), I remain worried that the TIP classification is politicized. While countries like Cuba, North Korea, and Iran offer a wide variety of defects and challenges to global security, from what little I know of the trafficking issue, they don’t come to mind as the worst violators as their Tier 3 rankings imply. There is a great danger in politicization of the list because it must be seen as legitimate to have any influence on behavior. If the TIP report is seen as just another outlet for the US to badmouth the countries it has problems with in general while saying nice things about those it likes or is courting the favor of, then no one will take it seriously, and states in violation will feel no compulsion to change their behavior. My worries stem from an observation about the State-sponsored Terrorism list, and how it is sometimes used in ways that are unrelated to terrorism. I fear that we will be negotiating bumping North Korea and Iran up a level in coming years in exchange for changes in their nuclear policies without any discernible change to their policies on trafficking.

My skepticism may be falsely rooted, due both to the fact that there can legitimately be a great disparity between volume of trafficking and ranking, and that the methodology of how various criteria are weighted or scored is not clear. The first issue revolves around the fact that countries are being graded on perceived compliance efforts, and not the scale of the problem in the country. There are good reasons for doing it this way (besides the fact that if volume of traffic were the primary criteria I suspect the United States would have to place itself on the bad boys list.) The idea is to reward moves in the right direction, and punish lack of rules and enforcement on trafficking. Therefore, you don’t want to keep countries with high trafficking volume but active campaigns for defeating trafficking in the 3rd tier, neither do you want to reward small countries who are not effective in fighting this crime but whose trafficking level is small because of reasons unrelated to the government’s efforts.

However, if there are many high volume of trafficking countries among those on the full and partial compliance (Tier I and II) lists, it might be telling about the efficacy of these enforcement efforts. It might tell us that, for the past nine years the activities to increase arrests and prosecutions have not staunched the flow. The report shows each country’s tier rank over time. It would be interesting to know: a.) how the trafficking level of countries that have moved up to Tier I have changed over time; b.) what has happened to the overall level of trafficking (i.e. is it being reduced or just shifted into other countries?) Unfortunately, I think it is probably difficult to have faith in models projecting trafficking amounts because it is not like these criminals are filing monthly reports to some data clearinghouse, and projections based on interdictions and arrests may be confounded by more effective criminal methods or any number of other causes. Even indications gleaned from interviews or interrogation with arrested criminals may not be trustworthy if there is an incentive for the prisoner to be deceptive.

How would one strategically combat human trafficking? The idea is to recognize and realign the incentives. In other words, one needs to get an accurate and honest picture of what is driving this behavior, and then restructure the costs and benefits so that the incentives no longer remain conducive to engaging in these activities. While the increased enforcement activities by governments realigns incentives by increasing the costs of trafficking, there will never be enough resources available to eliminate the problem in that way.

 The TIP report, and accompanying sanctions, recognize STATE incentives (e.g. to be a member of the global community in good standing) and may potentially realign them. There has been success in recent years in states heavily utilized (as origins, destinations, or transhipment points) for trafficking in making efforts to combat these activities, and some portion of this progress may be attributable to US and global pressures. However, the problem remains alive and well because the core motives are not recognized or eliminated.

While the State Department report is a positive step as far as it goes, it (when combined with public policy more broadly) does not leave me sanguine about the fight against modern day slavery. This lack of optimism is rooted in the fact that deep structural incentives exist to engage in this behavior that are not countered by existing activities.  One of these structural drivers is poverty, and, the fact is, we don’t have a good idea of how poor nations and regions can be brought to significantly higher standards of living. The few countries that have succeeded in going from Third World to First World are anomalies, rather than the product of well-understood Macroeconomic policies. Another structural factor is that many countries, including the United States, have extremely untargeted approaches to sex trade regulation. I suspect that this has greatly exacerbated the sex slavery problem by eliminating a prostitution labor supply of willing adults of sound-mind who stay out of the market solely because they consider themselves law-abiding citizens.

By an “untargeted” approach to sex trade regulation, I mean one akin to the Prohibition Era with respect to alcohol. This is in contrast to a much more effective present-day policy that is targeted toward preventing usage of alcohol that creates a danger to the health and well-being of those other than the (uncoerced) drinker. Prohibition, as we all know and most will admit, was an unmitigated disaster. Prohibition spawned its own violent crime, people died drinking low-grade “bathtub gin”, and, most importantly, people still drank alcohol because the demand was still there. On top of that, the few unscrupulous characters that were most willing to break the law were handed a very high profit margin oligopoly. Fortunately,  the country learned its lesson vis-a-vis alcohol prohibition and rescinded the law with the 21st amendment. Unfortunately, we haven’t made the leap to applying the lesson very similar issues.

While I am skeptical of its feasibility of implementation on the grounds of the deeply rooted religious mores of the US and other countries, I would advocate an approach similar to that taken with alcohol. Instead of trying to prohibit every sexual act of a commercial nature, you put your limited resources into a targeted fight against exploitation, slavery, and abuse. In other words, a woman or man who society would deem capable of making sound decisions for themself (i.e. a mentally-competent adult) would be able to choose prostitution as a job or career path. If they thought they needed assistance, they could hire security or an agent and pay them a pre-negotiated rate as any other employer would pay an employee. What would not be legal would be for any person to force a person to select this job, or to insinuate themselves as a “protector” or “manager” who would dictate what pay is received by the working party. Like other businesses, the prostitute would be free to determine what clients he or she took on, how many in a period, to set a price on a take it or leave it basis, and to cancel the transaction for cause. In essence, regulations would exist to prohibit force, fraud, or the illegal use of third-party property (conducting this business in a place against the owner’s wishes.)

What does this do for society? First, given a demand that we have no reason to think will go away soon (sex drives are pretty much biological imperatives, and some fraction of the population will either be undesirous, or unable, to meet these needs with a person with whom they share a relationship), the influx of voluntary participants would reduce the incentive for abducting and enslaving people. Second, if someone were trying to force another person into prostitution or to exploit them, the victim would have a clear legal recourse. Third, the vast sums of risk premium money associated with illicit activities that attract violent criminals into the market would not exist, and we might expect a few less shoot-outs in the world. Finally, if there were activities resulting in societal costs remaining, you could tax them to regulate them.

The Quandary of Old Revolutionaries

No one is more aware of the impermanence of power than old revolutionaries. Individuals who helped topple a government know that angry young men and women, spitting images  of themselves in their former glory, have a vast capacity to turn energy and passion into the death knell of an ineffective, corrupt, or abusive regime.

One approach to ensuring longevity and stability of a new government, as codified in the documents of America’s Founding Fathers,  is to accept the power of people to determine their own governance through democratic elections, rule of law, and limitations on the length and number of terms that office holders can serve. Another approach is to rely on propaganda, brutal suppression, targeted vote buying, and cultivation of cults of personality to maintain a passive populace. Authoritarian regimes have been dying off in the modern era, but are still more common than one would like. However, we are seeing interesting times for a couple of world’s remaining non-democratic revolutionary-born governments including, most notably, Iran and North Korea.

In essence, a non-democratic revolutionary government needs to create a successor to the divine right of kings argument. This argument was historically used to convince people of why they should accept rule by tyrannical forces who showed little or no interest in the citizenry’s well-being. This is unless, of course, you are a country such as Iran where the ”god-as-guarantor of earthly governors” argument still holds sway.  

Communist governents are noted for attempting to delude the people that they, as the citizenry, are, in fact,  in power- or in the process of being handed the reigns of power. One need look no further than the adoption of names, such as the Democratic People’s Republic of Korea(there are at least three things wrong with that name), to see the great effort made to convey to an oppressed people a false sense of empowerment. If truth-in-advertising ruled, Kim Il Sung would have named the country the Tyrannical Kim Dynasty House of Famine in Korea, but this would not have kept the pitchforks at bay. Communist regimes tell the members their populace that they are, as George Orwell described, all equal- except in that “some pigs are more equal than others.”  Of course, when you have no power, you are keenly aware of it, and so this leaves control of information, movement, and assembly as the true means by which the old revolutionaries keep from becoming the  former revolutionaries.

In some sense, the Ayatollah Khamenei’s dictates about how election dissent will be handled seem promising. He has suggested the possibility of an investigation, and has taken actions designed to calm civil unrest pending an investigation. However, he has also asked the foreign press to leave. This is, of course, precisely the thing a government does if it wants to crack heads with impunity, and without losing all appearance of legitimacy abroad. Khamenei seems to be hedging his bets by leaving open a variety of counter-revolutionary activities (note: I am not using this term in the manner that it has come to be used by Communist regimes, which is to say that a counter-revolution is any revolution that throws Communists out on their butts)  designed to ensure the theocracy holds.

I suspect the odd behavior of North Korea of late is also tied to regime control concerns. In this case, Kim Jong Il wants to continue the dynasty begun by his father, but his chosen successor is untried and vulnerable. Kim Jong Un needs to establish some credibility quick or the days of the House of Kim may be numbered. Of course, Kim Jong Il came upon a sure-fire strategy to keep the people from rising up. It includes all the usual element such as spying on them, beating any dissenters down violently, and building a cult of personality,  but it goes further to ensure that the population is starved half to death and are too busy foraging for sustenance to organize an opposition. However, the military will remain a threat unless Kim Jong Un’s primacy can be established.

North Korea’s Next Move?

In the past I have always found the Central News Agency of the Democratic People’s Republic of Korea (DPRK) (see: http://www.kcna.co.jp/index-e.htm) to be less than compelling and rarely worthy of examination. The stories are generally about how such-and-such Sub-Saharan African dictator sent congratulations to Kim Jong Il, or how the North Korean People wished to pay their respects to such-and-such nation. In essence, it was not only propaganda, but propaganda of the dullest and most mundane sort imaginable.

However, in recent weeks it is becoming increasingly worthwhile to visit the Agency’s site. Oh, it is still wild propaganda, but it is entertaining propaganda. Consider some of the current headlines:

“US Wild Ambition to Dominate Whole of Korea Can Never Come True”

“US Termed Chief Culprit of Nuclear Proliferation”

“Japanese Reactionaries Urged to Stop Their Rash Acts”

This last one is particularly amusing. It essentially rebukes elements inside Japan who would like that country to develop nuclear weapons. The irony is, of course, that the only way the Japanese will be sufficiently motivated to make major changes in their law as required to build a nuclear arsenal is in response to the continued provocations of their nutty newly nuclear neighbor who is constantly shooting missile tests across their bow lately.

Today the United Nations Security Council (UNSC) passed sanctions against North Korea consisting primarily of a complete arms export embargo and a partial arms import embargo. The big news seems to be China’s support for these efforts. While Chinese diplomats were careful to state that inspections must be carried out in accordance with international law, and, therefore, the sanctions did not equate to open season on DPRK shipping, they did go along with the provisions as stipulated. The Chinese don’t want a nuclear armed Japan any more than the North Koreans do. The difference is that the Chinese recognize that the way to avoid a Japan with nuclear weapons is a sane and stable North Korea.

Besides the long-range missile test that was earlier estimated would take place early next week, it will be interesting to see of what the North Korean response consists. As I have mentioned before, when you go as provocative as nuclear weapons tests, it is hard to up the ante without risking war. While the North Korean rhetoric is harsh, it is difficult to imagine what North Korea can do besides the same old bag of tricks it has been playing.

Iran’s Election: What Does an Opposition Win Mean for Nonproliferation?

It may be true that there isn’t any reason to expect that Iran’s position on its fuel cycle facility policy will change  regardless of who wins tomorrow’s election. After all, the Ayatollah Khamenei is the Supreme Leader, and does dictate policy on issues at that strategic a level. However, with Mr. Mousavi holding his own, we may yet see what can happen without the Howard Stern of heads of state in the Presidency of Iran.

It may, in fact, be a test case for the role of harsh rhetoric in international diplomacy. Are acrimonious words just for the benefit of domestic consumption and devoid of any influence on foreign policy outcomes. Or, on the other hand, can less vitriol translate into gains at the negotiating table? With both a US and Iranian leadership that is less prone to engage in harsh language, will we see progress toward reduction of the threat or not?

Will the Babcock and Wilcox Reactor Succeed Where Others Have Not?

Babcock and Wilcox (B&W) have announced plans to sell a scalable modular reactor called mPower(TM) that would come in sizes as small as 125 MegaWatt (electrical) [MW(e)]. (See:  www.babcock.com/products/modular_nuclear/) This is not the first we have heard of small nuclear power plants with long (5 year) fueling cycles. For well over a decade it has been argued that economies of scale for nuclear power plants are a myth, and that there are benefits to be had by building smaller plants. To clarify, the argument is that, while multiple units per site may be beneficial, the monstrous 1000+MW(e) plants do not result in lower average costs of construction than do smaller plants. While many studies seem to bear this out, it seems clear that utilities globally have not bought into the argument. One need only look at the plants being constructed to see that, except for Pakistan, these units tend to be on the order of 1000MW(e). B&W seem to be banking that they can gain purchase with an idea that has not proved immensely popular in the past, but their approach of combining the strengths of existing approaches to nuclear power with the small modular design may, in deed, give them an edge over some past plant ideas.

The arguments in favor of such small reactors are several. Smaller reactors mean that a utility will be taking a smaller amount of its base-load power off-line each time refueling takes place.  The modular design is anticipated to allow one to cut delays and the capital costs incurred in building power plants, though the fact of this will remain to be seen. Furthermore, such reactors could be used on smaller grids. There are safety gains resulting from having the containment area underground, and from passive safety systems that are also seen on other commercial designs of this generation. (Passive safety uses things like gravity-fed and convection-operated systems to achieve emergency cooling- rather than pumps and other mechanical devices. This reduces the amount that can go wrong and the amount of complexity in the system.) If these advantages prove to be true to a sufficient degree, they might change the fate of nuclear power.

The term “nuclear renaissance” has been bandied about a lot in recent years. The presumption is that we are on the leading edge of a massive world-wide expansion of nuclear power. As the argument goes, as costs and /or regulatory constraints are put on carbon emissions (e.g. the cap and trade system being worked on in the US), nuclear power, whose operation does not result in greenhouse gas production, will be a big winner. However, it remains unclear to what degree an expansion of nuclear power will include either nascent nuclear power generating countries, or, for that matter, the US. 

A review of the list of states currently constructing nuclear power shows that, except for Iran, all of the countries with plants under construction have a history with nuclear power plants. The bulk of construction is being carried out in large emerging market economies. 26 of the 45 plants being built are in the BRIC (Brazil, Russia, India, and China) countries, and other large emerging markets including Taiwan, Argentina, and the Republic of Korea account for eight more of the new plants. Of those building plants, many (e.g. Finland and Iran, though for very different reasons)  are experiencing major problems with delays and cost-overruns.  

Delays and cost-overruns are at the heart of the apparent death and only slow recovery (if it proves to be the case) of nuclear power. The appeal of nuclear power goes like this: While the cost of building nuclear power plants is enormous, the cost of running it afterwords (fuel and operations costs) compared to fossil fuel plants are quite low. Therefore, you can put some of that high revenue relative to cost into paying back your loans, and eventually, once the debt has been paid off, nuclear becomes the utility’s cheapest (and, therefore, most profitable) energy source.

There are several potential flies in the ointment with respect to the dream of nuclear power. First, delays translate into postponement of the date at which you are beginning earn a return on your investment with which to pay back loans. Readers from Georgia will be familiar with the controversial end run around this problem that utilities have made by successfully lobbying to get rate hikes in place that allow them to build a pool of funds with which to pay off debt before the plant begins to operate. Such schemes are hugely controversial for many reasons, including that they reduce the incentive to stay on schedule, current power customers subsidize future customers, and they raise a lot of questions about what happens if the plants don’t come on line. Second, cost-overruns also have the effect of increasing the capital costs. Finally, there is always risk that due to regulatory, legal, or political reasons, there will never be a return on investment. The ill-fated Long Island Lighting Company experienced this first-hand when they fully-constructed the Shoreham Nuclear Power Plant, but it never earned revenues.  Not only were massive construction costs incurred in building Shoreham, but there were also not-inconsequential costs of decommissioning, all of which had to be paid for from sources other than earned plant revenue.

Suffice it to say, a lot of nuclear energy’s woes revolve around the shear scale both with respect to finance as well as plant size. There are several nuclear aspirant countries that could not go nuclear even if they could manage to secure a few billion dollars in loans because their electrical grid or grids are not large enough to support even the smallest of the commercially available reactor designs now sold. Typical nuclear power plants are in the area of 1000+ MW(e) per unit. If that one unit makes up more than ten percent of the installed capacity on a grid, it is not likely to be feasible.

The B&W claims indicate that it would mitigate both the cost / finance difficulties and the grid size limitation issues. How the problem of grid size limitations are affected is elementary, but the mechanism by which the financial challenges are reduced is less intuitive. The idea is that the modular design would mean that the reactors could be factory-constructed and rail-shipped to  the plant location. Of course, the reactors themselves are only a portion of the infrastructure that must be build, so I’m not certain of the degree of savings to be had. That is, the cooling system, turbine housing, and systems maintain the pressure in the system are all built on site. (Of course, many of these systems are very similar to fossil fuel plants.) If it is true that you can bring the units on-line more quickly, and that they can be operated while construction is being done on the others, this could be a significant benefit. It would speed the time to receipt of revenues and the capacity to pay back loans, and would reduce the value of interest to be paid. Of course, if more utilities are successful in achieving Georgia Power’s sweet-heart deal (and it is not certain that many US utilities will build nuclear power plants if they have to shoulder a bigger portion of the risk) then there may be little incentive to reduce delays or cost-overruns.

CTBTO PrepCom Meeting

The 32nd Session of the Comprehensive Test Ban Treaty Organization (CTBTO) is going on June 8-9, 2009. The Comprehensive Test Ban Treaty (CTBT) would prohibit all nuclear tests. A 1963 Partial Test Ban Treaty (PTBT) outlawed testing of nuclear explosive devices in space, underwater, or in the atmosphere, but left open the option of subterranean tests.

The CTBT is being talked about more these days with a US administration that supports its implementation and a Congress more likely to ratify. However, the US is only one of nine Annex 2 states that must ratify the CTBT for it to enter into force. Of course, among the nine is the Democratic People’s Republic of Korea (DPRK.) Should it come down to North Korea holding things up, there would probably be adequate support for amending the Treaty requirements to eliminate the need for their cooperation. The Kim government has demonstrated a desire be an outlier from the non-proliferation and disarmament regime by withdrawing from the Nuclear Nonproliferation Treaty (NPT) as well as by being the only state to conduct tests in recent years.

However, that still leaves seven Annex 2 countries that have not ratified the Treaty including: China, Egypt, India, Indonesia, Iran, Israel, and Pakistan. All of these states are within the regime, and their participation will be critical. Of these, Iran provides an interesting case. Its ratification of the CTBT might be made part of a negotiated agreement that would end opposition to their fuel cycle facility development provided they enact Additional Protocols to ease concerns about diversion. Iran can convincingly argue that they have a right under the NPT’s Article IV to develop a fuel cycle infrastructure to support the nuclear power plant they have under construction at Bushehr, and in the realm of isotopic separation medical technology as well as fuel cycle arguments apply. However, there is no reasonable explanation for opposition to nuclear explosive testing unless you desire to retain the capacity to build  nuclear weapons. That is, if their intent is truly the peaceful use of nuclear energy and medical isotope development as they have said, they should have no objection to prohibitions on testing. The myth of a utility to be gained from Peaceful Nuclear Explosions (PNE) seems to have long since been put to bed.

Other opponents, such as Egypt and India, object primarily on the basis that the CTBT might help to institutionalize a “have – have-not” division with respect to nuclear weapons. If such countries are true to their word, their perception of the US and Russia’s good-faith efforts to disarm will be critically important to obtaining their ratification. I remain skeptically that the CTBT can enter into force, but am interested in the views of others.

 

It is interesting to note that, despite the fact that the CTBT has not entered into force, the verification system consisting of four types of monitoring stations (Seismic, Infrasonic, Hydro-acoustic, and Radionuclide stations that measure the force and direction of an explosion through the ground, air, and water respectively, plus determining the nuclear nature of the test [i.e. radionuclide stations]) is up and running with partial capacity. While the system is not yet completely on-line, it has been useful in providing information about the two North Korean nuclear device tests.