The Russians Have the Sanctions Hammer

Russia controls more than 45% of the world’s Uranium enrichment capacity. The U.S. imports 90% of its nuclear fuel. Do the math.

Lost in all of this talk about the U.S. Congress adding sanctions onto Russia is Russia’s unique placement in the world’s Uranium industry.  So much focus is placed on its Oil and Gas industry (and specifically the share of its exports) that it blinds our analysis to the how strong Russia’s position in world nuclear power is.

And, so, John McCain can grandstand all he wants about how Russia is nothing more than a “gas station masquerading as a country” what he doesn’t want to admit to himself or the world is that Russia is more central to the world’s uranium fuel market than Saudi Arabia ever was to the crude oil market.

Russia’s power in this industry doesn’t come from its production of Uranium Oxide (U3O8 or yellowcake) it comes from owning 45% of the world’s enrichment capacity into a usable fuel.  Russia only produces around 3,000 tons of U3O8 annually.


Kazakhstan is the world’s largest producer of yellowcake with the world’s largest reserves. Do you seriously think Kazakhstan, one of Russia’s strongest allies, is going to go it alone in one of its major industries if the new Cold War between the U.S. and Russia intensifies further?

I have two words for you.  Hell and No.

Canada’s Athcabasca Basin in Saskatchewan has been instrumental in expanding world yellowcake supply in recent years.   But, that’s not changing the dynamics of the industry, it’s just keeping Urainium prices depressed.

SWUs Trump SJWs

Because, the issue isn’t ore production but turning that ore into usable fuel, called Single Work Units (SWU).  And the U.S. and Canada are not interested in refining Uranium due to environmental policy.  I’ve heard nothing from the Trump administration on this either, so, nothing is going to change in a way to affect current or fear future events.

Rosatom, the Russian State Nuclear Energy company, has tremendous leverage.  The faux outrage over Hillary Clinton selling 20% of U.S. Uranium reserves to the Russians is irrelevant.

I will paraphrase her for the only time in my life, “What difference does it make” to expand ore production when the Russians effectively control the refineries?

Because due to policy changes over the past twenty years the U.S. has no ability to credibly produce its own nuclear fuel. So, improved Canadian ore production still has to be shipped to Russia or Europe for processing.

Yes, Russia and Europe.

Uranium Enrichment

Moreover, look where future enrichment capacity is coming from… China.  And all that will do is help China supply itself with fuel for the power plants Rosatom is currently building for them, India, Turkey, Iran, and pretty much the rest of the world that wants nuclear power.

19.5% of our electricity comes from Nuclear Power.  The base load of the U.S. electricity grid is supplied by Russian SWU’s, folks.  Without relations with Russia there is no air-conditioning.

We are the world’s largest consumer of SWU’s, using over 32% of the global total. That’s around 15.1 million SWUs.  France is next at 14%.  Over 90% of our Uranium consumption is imported.  The breakdown is as follows:

That’s where it was purchased from, not where it was processed.  Crude Oil wells are not an energy infrastructure.  Refining and distribution is.  We may purchase it from Kazakhstan, but it still has to go through one of the processors above.  I’m simplifying this for discussion purposes, but you should be getting the picture.

All discussion about U.S. energy security is a non-starter until we discuss Uranium.  It is the limit at which the U.S. Congress can make noise until Putin has had enough.

You notice he never talks about it.  No one does.  Because, all puns intended, this is truly the “Nuclear Option” in geopolitics.  It is the hammer that can be brought down once the world is in an SWU deficit, which we are rapidly approaching.

Sanctions Response

Russia’s announcements of expelling some diplomats and seizing property formally used by those diplomats are, in effect, virtue signaling.  This is Putin putting on a show before things get serious.

The new sanctions bill says nothing about Russia’s nuclear industry.  It says nothing about German or French companies being sanctioned for doing business with Russian nuclear exports or processing Russian yellowcake into fuel.

It can’t say anything about this and John McCain bloody well knows it, otherwise the Russian response is to turn to Kazakhstan and put a hold on exporting another SWU to the U.S.

And that ends the discussion of the U.S. being a world manufacturing anything.  Our electricity grid is already over-taxed.  The base load from our nuclear plants is our comparative advantage economically-speaking.

That will erode over the next decade as China and even Russia expand their use of nuclear power.  Again, China’s embracing of solar is all Keynesian pump-priming make-work.  It’s not a solution to their energy problems.  Russian Oil, Gas and Uranium is.

If things get really testy over the Nordstream-2 pipeline with Germany, then you can bet that becomes an issue as well.  This is why the sanctions are so stupid.  They are driving Germany into the arms of Russia even faster.  They are driving the Russians to deepen ties with China.

The U.S. is alienating the very people who it depends on for the energy to run its heavy industry.

The Germans won’t use the SWU’s they produce anymore, shuttering their nuclear plants, and I’m sure they are selling them to the U.S. for now, but those SWU’s give them a pretty strong bargaining chip in the future of world energy politics.

Germany is occupied territory, which limits its responses.  Ever wonder why the EU wants its own standing army?

Merkel, along with Putin holds a powerful leash on the U.S.’s ability to push things much further.

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10 thoughts on “The Russians Have the Sanctions Hammer

  1. Important summary – thanks Tom. For those of us who are out of touch with Washington – what kind of sanctions and does it hurt the USA short term in addition to long term? e.g. our exporters. A link to best coverage will do.

    • Hello Dave,

      The sanctions on the oil and gas sector don’t have any real teeth, as I explained in my Seeking Alpha article from the other day. Trump has the option of doing something about this. The big question is whether Trump has the stones to sanction Royal Dutch Shell and I don’t think he does. He wants leverage over Iran while leaving Russia alone and McCain is tying his hands. As long as no one is talking Uranium, things are still salvageable. But, if Uranium enters the picture, the U.S. gets exposed badly.

      I suspect Putin will wait until after the mid-term elections to see what kind of Congress Trump has (if any) to work with. Because this law is terrible. The long range effects are the EU/Russia/China coalescing around OBOR (the new silk roads) and in the short term anything that weakens Trump weakens the dollar.

      But, that will end when the U.S. has to raise the debt ceiling. Congress will own all of this and Trump will use it to fundraise like mad for his people in the mid-terms and then add 10 seats to the Senate. At which point the Democratic party collapses and things really get interesting.

      For our core portfolio positions, Gazprom will be weak for a time until we know what happens next, good stink bid opportunity, but no hurry since it’s now ex-dividend for the year and RSX will do well, as the Ruble weakens slightly and Germany moves to lift sanctions by degrees over the next year, which we can now bank on.

    • Decker,

      Thanks so much. There’s more on the way. We’ll be revamping this site in the next few weeks for the proper launch of Gold Goats ‘n Guns. Check out my YouTube Channel as well as my work at and


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