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The Ultimate Source

Putin has been locking up mine production outside of Russia. In mid-2010, AtomRedMetZoloto (ARMZ, an arm of state-owned Rosatom) boosted its stake in Uranium One, one of the largest publicly traded uranium producers in the world, from 17 percent to 51 percent. At the time, ARMZ wanted to use Uranium One as a public vehicle to attract investors for its expansion plans.

That notion evaporated when Fukushima killed investor interest in uranium. Thus, in 2013, it acquired all of the remaining shares in Uranium One for $1.3 billion and took the company private at over 100 percent premium to the market price of the shares at the time. The timing was right.

Uranium One is a major producer, with 16 million pounds per year. Through the acquisition, Russia picked up mining operations in Australia, Canada, Kazakhstan, South Africa, Tanzania, and even the United States, where it will now produce more uranium each year than all American mining companies combined.

Russia has signed uranium exploration and development agreements with Japan, France, India, South Korea, and Canada. ARMZ is already involved in joint production projects with Kazakhstan's state-owned Kazatomprom, the world's largest producer of uranium.

Russia has also been courting Namibia, which possesses 5 percent of the world's known uranium reserves. It is already a big producer and is expected to become the number two yellowcake exporter by 2018, after Kazakhstan.

Egypt has a place in Putin's plan as well. After a 2013 meeting with then-President Mohamed Morsi, it was announced that the two countries would "resume cooperation in peaceful nuclear projects," including construction of nuclear power plants. Cairo wants 4 gigawatts of nuclear generating capacity by 2025, enough to power about 3 million homes. Egypt also invited Moscow to cooperate in the joint development of uranium mines. Given the benefits to Egypt, the agreements are likely to survive Morsi's overthrow.

Going to School in Mongolia

Russia is willing to go pretty far to get what it wants. Though Putin shies away from waging war over resources—preferring to let other countries do the dirty work, then step in for a share of the spoils, as in Iraq—he's not shy about economic warfare. Consider events in Mongolia, one of those bordering nations, like Ukraine, that Russia proprietarily considers part of its "near-beyond."

Russia was the first developer of Mongolia's 7,500-acre Dornod deposit. The Soviets and then the Russians mined it from 1988 to 1995, with a workforce that peaked near 10,000. Russia spent $150 million on developing the site but then abandoned it in 1995, during the turbulent time when the money supply from Moscow had all but dried up.

Despite leaving, Russia never lost its sense of entitlement for Dornod.

The project sat idle until 2003. Then the Mongolian government opened it to Western mining interests. It was snapped up by a small Canadian company, Khan Resources, which took a majority stake and also took on the Mongolian government as a partner.

Then Khan got clipped by Putin.

In January 2009, Russia and Mongolia announced a joint venture for uranium extraction. Next, in January 2010, the Mongolian parliament bestowed upon the Mongolian government a 51 percent share in every project in which the Mongolian government had an investment. That included Dornod. Thus Khan lost control of the project through a no-compensation expropriation; that is, they were robbed.

The matter is now entombed in international litigation. Whatever Khan recovers in the legal fight, if anything, will go to the lawyers— another dead client for dinner.

There is no question that the impetus for squeezing out Khan came from Moscow. The focus of then-Prime Minister Putin's July 2009 visit to Mongolia was uranium. And it was no coincidence that then-President Medvedev would show up in Ulaanbaatar a month later, bringing ARMZ's president with him. Guess what they were there to discuss.

Relations between the Russian leadership and Mongolia's President Tsakhiagiin Elbegdorj seemed to turn chilly over the course of 2010. That's when the economic screws were beginning to turn. During the summer of 2011, there was an unexplained interruption of Russian diesel fuel deliveries, which threatened Mongolia's harvest. The message to Elbegdorj seemed clear: Toe the line on uranium or face unpleasant consequences.

As Russia has been consolidating its position in Mongolia, U.S. efforts in the country have crashed and burned. In 2011, the Mongolian government was in secret negotiations with Japan and the United States over "nuclear fuel lease contracts," under which it would process uranium into nuclear fuel and export it. In return, Mongolia would agree to take back spent nuclear fuel from its foreign customers.

The United States was deeply involved in the talks. Both the supply and disposal features were very appealing. And Mongolia (with U.S. support) had a lot to gain. First, the country would establish itself as an accredited dump for nuclear waste. Then it would sell nuclear fuel with a commitment to take it back when it was spent—like an old-time milkman who would pick up the empty bottles. Mongolia would immediately become an important, not to mention independent, player in the worldwide uranium fuel business.

In September 2011, President Elbegdorj abruptly pulled the plug. The ostensible reason, as he described it, was that the nuclear waste of other countries is a "snake grown up in another body. ... Receiving back the nuclear waste after exploiting and exporting uranium must not be, as I think this is, a pressure from foreign superpowers, and we must throw out this delusion." So a law was passed banning the importation, transit, or storage of nuclear waste.

Perhaps Elbegdorj's concerns were genuine. But many would see the hand of Vladimir Putin once more at work.

Today Mongolia finds itself in the unenviable position of being down to just one partner for developing its uranium industry: Russia. And apparently Mongolia will have but a single role: provider of feedstock to ARMZ. Russia is now firmly entrenched at Dornod, and Mongolia—its uranium supplies for commercial purposes largely in Putin's hands—will join Kazakhstan as an obedient foreign client.

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