Exporting Disaster

~ The Cost of Selling CANDU Reactors ~

written by David Martin
of Nuclear Awareness Project
for the Campaign for Nuclear Phaseout

November 1996

For a copy of the complete report ($10 + shipping) write
Campaign for Nuclear Phaseout
1 Nicholas Street   Suite 412
Ottawa Ontario
K1N 7B7 Canada

Table of Contents

Executive Summary

1. Introduction

2. CANDU Marketing

3. Past CANDU Sales

4. Other CANDU Sales Attempts

5. Agents' Fees


Appendix A


Table 1 : Canadian Reactor Exports

Table 2 : "Agents' Fees" Paid by AECL 1977-1996

Table 3 : Canada's Nuclear Cooperation Agreements

Executive Summary

Canadian CANDU exports have entailed extraordinarily high costs for Canadians, both in financial and in human terms.

  • Canada's nuclear program has cost the Canadian treasury over thirteen billion dollars to date. Yet domestic sales have dried up, and export sales are scarce. Any sales that occur cannot possibly recoup the value of the nuclear subsidies already received from Canadian taxpayers.

  • The dark underside of nuclear power has always been its potential to aid in the production of nuclear weapons, through the production of plutonium - an inevitable byproduct of reactor operation. Of all commercial reactors, the CANDU design produces the most plutonium per unit of energy, and is the most difficult to safeguard.

  • The ethical cost of CANDU exports has also been high, as CANDU sales have repeatedly involved bribery, and have contributed to Canada's abandonment of an effective human rights policy.


In a February 1996 publication by the Campaign for Nuclear Phaseout entitled Nuclear Sunset: The Economic Costs of the Canadian Nuclear Industry, it was demonstrated that Atomic Energy of Canada Ltd. (AECL) [1] received federal taxpayer subsidies totalling $13 billion up to the end of March 1995.

Reactor sales cannot hope to recoup that massive subsidy. Indeed, the proceeds from reactor sales may not even keep pace with ongoing annual federal subsidies - AECL will receive a subsidy of $174 million for 1996-97 (up from $172 million in 1995-96). The amount of the annual subsidy is supposed to drop to $132 million in 1997-98, and to $100 million in 1998-99 - presumably it will then remain at that level.

Since Canadian utilities are clearly not interested in building more reactors, AECL maintains that prospects for reactor exports justify ongoing subsidies from Canadian taxpayers. However, nuclear prospects are not numerous. The number of nuclear power reactors under construction around the world is at its lowest level in 25 years. Installed nuclear capacity worldwide has remained relatively flat throughout the 1990s. [2] Given the intense competition for reactor sales, the scarcity of sales opportunities, and the domination of the existing world market by other reactor types, AECL cannot realistically expect to achieve a large number of sales, or even to capture a significant market share.

The likelihood of market success is further reduced by the CANDU's worsening international performance. Contrary to the myth of CANDU superiority, in 1995, the load factor for CANDU reactors worldwide was 61.4% - the worst of all the major reactor types. [3] The growing trend towards more competitive electricity markets worldwide will also discourage CANDU sales, because nuclear power is a high cost, high risk option.

Early CANDU sales involved concessionary financing, which entailed some combination of low prices, outright grants, low or no interest, and long repayment periods. Occasionally other perquisites were made available, including outright bribes or trade concessions. The full extent of hidden incentives and subsidies for these past sales, as with current CANDU deals, may never be known.

In the case of CANDU sales to China, Natural Resources Minister Anne McLellan claims that financing for the CANDU sale to China will be on a "commercial" basis. However, the loan, thought to be about $1.5 billion, will go through a crown corporation (the Export Development Corporation) on its "Canada Account", which is carried on the books of the Department of Foreign Affairs and International Trade. The reason for this is that the loan is too big and too risky for the EDC alone, or for the private sector financial community. The EDC typically provides cheaper loans (i.e. at lower interest rates), for longer periods than commercial banks. There is some doubt as to whether the rules of the OECD [4] Consensus Agreement will be observed by AECL and its partners in the sale of CANDUs to China. Indeed, in the recent past, the OECD Consensus Agreement has been violated by one of AECL's partners.

In addition, there are serious questions about:

  • the absence of political risk insurance on the loans;

  • the degree to which AECL will 'give away the store' through technology transfer;

  • the consequences of serious cost overruns; and

  • the cost of possible performance guarantees or warranties.

On the other hand, CANDU deals with other financial structures, such as Build-Own-Operate-Transfer (BOOT) potentially carry even greater risks, as AECL would become the owner and operator, relying on electricity sales to recoup its investment.

The minimum political requirement for CANDU deals should be transparency and disclosure. AECL traditionally keeps its nuclear financing deals secret, but if the China deal is strictly commercial as the government claims, then the details should be made public. AECL is after all a crown corporation, and CANDU sales to China have the economic and political support of the federal government.

CANDU and the Bomb

The explosion of an atomic bomb by India in 1974, using plutonium from a Canadian-supplied reactor, demonstrated the very real contribution that Canadian reactors can make to nuclear weapons proliferation. Canada promptly discontinued nuclear cooperation with India. Within a few years, Canada also broke off nuclear cooperation with Pakistan because of that country's determination to pursue a nuclear weapons program in response to India's demonstrated capability.

Despite Canadian and international non-proliferation agreements, CANDU sales carry an inherent risk of proliferation - purchasers can simply ignore their commitments, as India did. All of our past CANDU customers (India, Pakistan, Taiwan, Romania, Argentina, and South Korea) have at one time or another pursued a nuclear weapons program.

In recent years, without any public discussion or parliamentary debate, Canada has allowed its non-proliferation policy to be eroded. Since 1989, Canada's nuclear boycott of India and Pakistan has been abrogated by quietly allowing AECL and other Canadian companies to provide nuclear assistance to both countries.

Because China has given aid to 'threshold' nuclear weapons states like Pakistan, the United States government will not allow its privately owned nuclear companies to sell reactors to China. The Canadian government has no ethical compunctions about selling reactors to China - it is eager and willing to take advantage of the absence of American competition.

Human Rights

Human rights violations are particularly severe in countries which AECL has targeted as its highest priorities for CANDU sales. China, Indonesia, Turkey and South Korea, among other AECL customers, have consistently been identified as among the world's worst human rights violators. The Canadian government has argued that through a policy of 'constructive engagement', i.e. by establishing even stronger commercial relations, Canada can encourage improvements in human rights. However, such a policy of appeasement is self-serving and hypocritical. If Canada is serious about improving human rights (or discouraging proliferation), it should impose trade sanctions, rather than expanding trade.


Corruption is particularly entrenched in countries such as China, Indonesia, South Korea, and Turkey, all of which are CANDU marketing targets. AECL already has a history of using bribes to secure CANDU sales. Over $22 million in bribes - disguised as agent fees - was paid by AECL to secure sales to Argentina and South Korea. As recently as 1994, AECL's agent in South Korea was arrested and jailed for paying bribes to the head of South Korea's nuclear utility. Since AECL was first compelled to disclose "Agent Fees" in 1977, about $60 million has been paid out for dubious purposes. If bribery and corruption are the price of CANDU sales, Canada should get out of the business.


AECL's most promising customers are all located in countries that exhibit serious human rights problems, and suffer from extensive corruption. Some are developing countries with oppressive and dictatorial governments (eg. China, Indonesia). Some are governments that have recently shifted to more democratic systems, but still suffer from the heritage of a dictatorial past (eg. South Korea, Romania, and Turkey). The absence of democracy, or the existence of a fragile democracy replete with human rights violations, invariably means that public debate and consultation on nuclear programs are non-existent or severely limited. Even in developed countries such as Canada the nuclear industry is secretive, democratic processes are rare, and information is often inaccessible. In developing countries these problems are far worse.

Given the fact that the prospects for foreign sales of CANDUs are minimal, the ongoing subsidization of the Canadian nuclear industry cannot be justified. In particular, the financing of CANDU sales should not be supported by the federal government. Canadian taxpayers should not be expected to assume the risks of reactor sales.

. . . back to [
Table of Contents ]

1. Introduction

AECL's reactor export history is a tangled tale of multi-million dollar marketing extravaganzas, complete with top-level political junkets and diplomatic pressure as well as repeated use of lavish bribes. For all their cost and effort, these sales attempts have been remarkably unsuccessful. See Table 1 for a list of Canadian reactor exports. The few "successful" sales have required extravagant subsidies from Canadian taxpayers, as well as the expenditure of a great deal of 'political capital'.

From the viewpoint of the recipient country, investment in nuclear power is highly capital intensive - displacing other cheaper and more effective energy alternatives, and aggravating the indebtedness and the balance of payment problems that typically plague countries in the developing world.

Canada's nuclear exports have also contributed significantly to nuclear weapons proliferation - most dramatically with the production of plutonium by India in a Canadian-supplied reactor and the subsequent explosion of a bomb in May 1974. It is a sobering thought that the plutonium produced in a CANDU reactor can be used for bombs by any regime in any of our client countries, at any time in the next twenty thousand years - long after the reactor that produced the plutonium has been shut down, decommissioned and forgotten.

Canada had a relatively early start on its domestic reactor program, but it missed the first real rush of overseas sales of nuclear reactors. The rush was led by the USA, where an amazing 50,000 MW of nuclear generating capacity was ordered between 1964 and 1967. [5] No CANDUs have ever been sold in the USA - the Light Water Reactor (LWR) designs of Westinghouse and General Electric dominated these sales. Other countries followed the American lead, until the LWR dominated the world market - a lead that has never been lost.

AECL and the CANDU design have been doomed to pick up the crumbs from the reactor marketing table. The Canadian nuclear industry has always held out the promise that more domestic or export sales are just around the corner, but these promises have not borne fruit. The possibility of future sales has been the justification for continued federal subsidies, averaging about $180 million per year over the last 5 years. [6] However, despite the sales of one reactor to South Korea in 1990 and two more in 1992, AECL will not likely see a significant turn-around. The Korean sales were the first in over a decade, since an agreement was signed for the sale of a reactor to Romania in 1979.

The massive investment of public funds in the past is also used as a justification for continued investment. It is true that these funds are "sunk" and cannot be retrieved, however, there is a real question as to whether good money should continue to be thrown after bad, especially when it comes from beleaguered Canadian taxpayers. The nuclear industry has not become self- sustaining despite unflagging massive subsidies for 50 years.

There has been a buyer's market in nuclear power for more than twenty years, and this situation will not change in the foreseeable future. Because of a vast surplus manufacturing capacity among the reactor vendors of many countries, potential CANDU purchasers are in an excellent position to demand extravagant concessions of various sorts. For example:

There will also be demands for performance guarantees on CANDUs sold overseas - asking Canada to accept the risk for cost overruns and unforeseen technical problems, both common occurrences with nuclear power plants.

AECL refuses to disclose how much money it spends on its marketing campaigns. In 1980, it was suggested that early AECL marketing bids in the 1968 to 1972 period in Romania, Mexico and Australia cost about $1 million each. [7] However, this amount (if accurate) is extremely low by today's standards - one media report stated that the marketing campaign in the early 1980s in Mexico alone had cost $50 million including the establishment of a Mexico City office which has since been closed.

In 1987, AECL reported that it had offices in [8]

An office was opened in Washington D.C. in 1988 to serve as the office for AECL Technologies Inc., a wholly owned subsidiary aiming at selling engineering services to American utilities with light water reactors. [9]

In 1995 AECL maintained overseas offices in [10]

Some indication of the extent of Canada's efforts at nuclear trade can be obtained by an examination of the Nuclear Cooperation Agreements (NCAs) that have been signed between Canada and nuclear client (or potential client) states. Before Canada can trade in nuclear technology or nuclear fuels which might contribute to nuclear weapons proliferation, Canada requires that a bilateral NCA be signed. As of October 1996, 23 current NCAs had been signed (see Appendix A), covering full nuclear trade with 37 countries.

The lack of an NCA does not prevent AECL or other nuclear industry companies from negotiating sales of technology or fuel, but an NCA is a prerequisite before such trade can take place. This non-proliferation policy has been eroded in the case of India and Pakistan. Although NCAs are not in force for either India or Pakistan, the Canadian government allowed the restart of commercial nuclear activities beginning in 1989 (see sections on India and Pakistan). Canadian uranium is also being allowed in Taiwan, despite the absence of an NCA (see Appendix A).

Section 2 of this report, entitled "CANDU Marketing", focuses on those countries that are currently among AECL's top CANDU marketing priorities: China, Indonesia, Romania, South Korea, and Turkey. In each case, we look at AECL's past sales (where applicable) and current marketing activities. We then take a brief look at the country's domestic nuclear program; at its nuclear weapons program (where applicable); and at the issues of corruption and human rights.

Section 3, "Past CANDU Sales", examines some of the countries where AECL has made reactor sales in the past, including: Argentina, India, Pakistan, and Taiwan. India is examined in some detail, because of past CANDU sales; because India has launched a nuclear weapons program; and because India has 'localized' the CANDU 200 MW reactor.

Since 1989, Canada has backtracked on its non-proliferation policy and restarted commercial nuclear relations with both India and Pakistan, despite the fact that neither country has signed the Nuclear Non-Proliferation Treaty.

Section 4, "Other CANDU Sales Attempts", describes a grab-bag of past and current marketing efforts by AECL. Some of these attempts are clearly 'dead', and are included just to provide a historical perspective. These include countries such as Australia, France, Greece, Italy, Japan, Mexico, the United Kingdom, the United States, and Yugoslavia.

The remaining attempts still hold some current interest for AECL. These include: Chile, Egypt, Hungary, The Netherlands, The Philippines, Russia, and Thailand.

Section 5, "Payment of Bribes & 'Agent Fees' by AECL", documents the fees that AECL has paid to its "agents" since the 1977 fiscal year.

[ . . . MORE . . . (China, Indonesia, Romania, Korea, Turkey) ]

Table 1. Canadian Reactor Exports

Embalse a
RAPP-1 c
South Korea

                    Notes on Table

        MWe = Megawatts of electricity
            UC = Under Construction
    a Sometimes known as "Cordoba"
    b CIRUS = Canada-India-Reactor-United-States
    c RAPP = Rajasthan Atomic Power Plant,

        also known as RAPS
      (Rajasthan Atomic Power Station)
    d KANUPP = KArachi NUclear Power Plant
    e TRR = Taiwan Research Reactor

[ . . . MORE . . . (China, Indonesia, Romania, Korea, Turkey) ]

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