Russia may restrict supplies of key industrial materials to the US
Russia may restrict cooperation with the US in some key industries for both countries in response to a new package of sanctions, approved by the US Congress and President.
Despite the fact that the current direct commodity turnover between the countries remains small (not exceeding US$20 billion per year) the US has a dependence on Russia in some strategic industries.
For example, the supplies of Russian uranium for the needs of the US nuclear power plants in recent years have significantly increased. During the period of 1994-2013, uranium deliveries, which were carried out by the Russian TENEX, were conducted on a non-commercial basis through the Megatons to Megawatts Program.
At that period of time uranium from Russia covered about half of the needs of the US nuclear power plants. Since 2015, the supplies have gone through direct commercial contracts with US energy companies. TENEX has been granted a quota of 20% of the market (about 3 million SWUs per year). In 2011-2016, the quota was taken up in full, while in 2017-2020 – by 95%.
TENEX currently has 25 contracts with 19 consumers from the US with the planned supplies until 2028. The value of the contracts are estimated at US$6.5 billion. Possible suspension of supplies will hurt both sides: the US will have to seek replacement for the Russian uranium in the market with a small number of players, while TENEX is unlikely to quickly replace the US market with alternative ones.
In the meantime, titanium currently remains another double-edged area of economic cooperation between the US and Russia.
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At present the US remains the main export market for Russian VSMPO-Avisma Corporation, the world’s largest titanium producer. In 2016 the US accounted for 32% of shipments and 48% of export sales of VSMPO.
In general, currently VSMPO-Avisma accounts for about half of titanium imports to the United States. The company covers more than a third of annual titatnium needs of Boeing. Investments are also mutual – VSMPO-Avisma has subsidiaries and joint ventures in the US, while Boeing has a joint venture in Russia.
Moreover there is also a possibility of the restriction of Russian aluminium imports to the US. Currently up to 25% of sales of Russian aluminium, which are supplied by state-owned aluminium monopoly Rusal accounts for the US and the introduction of countersanctions from Russia may negatively affect profits of the Russian company.
Finally, Russia’s countersanctions may result in the suspension of the US projects, implemented by TMK, a leading global manufacturer and supplier of steel pipes for the oil and gas industry, which has strong presence in the US market.
According to recent statements of an official spokesman of TMK, it plans to double the current output of pipes in the US and to begin supplies of up to 300,000 tonnes of seamless pipes from Russia and Romania to the United States during the next several years.
Eugene Gerden is an international free-lance writer, based in St. Petersburg, who specializes on writing in the field of mining, metals and rare earth metals. ... <Read more about Eugene Gerden>