The Multinational Monitor


I N T E R N A T I O N A L   M O N E T A R Y   F U N D


French Nuclear Monopoly Finds Fertile Ground Abroad

by Carole Collins

On February 18, 1982, French farmers forced police and nuclear workers to flee the test drilling site of a proposed nuclear plant in Carnet in western France. They used a novel antinuclear weapon: bees.

The action followed fierce earlier clashes between police and residents, including a February 1 blockade by 2,000 protestors that fought police with stones and Molotov cocktails. The Carnet protest highlighted a growing confrontation between French public opposition to the nuclear power plants mushrooming across the French countryside and to the business and government push for further expansion of France's nuclear capability.

Less visible has been the growing public concern with the proliferation risks posed by France's export of nuclear reactors, technology, and enriched uranium to countries refusing to sign the Nuclear Non-Proliferation Treaty. Central to both controversies is the French company which won contracts to build 44 of France's 54 operating or planned nuclear power plants and has marketed all France's nuclear reactor exports: Framatome.

Framatome has been the linchpin of France's strategy to achieve nuclear selfreliance and end U.S. domination of world nuclear export markets. The largest single manufacturer of nuclear reactors in the world, Framatome has helped France become the third biggest producer of electricity generated by nuclear power after the U.S. and the U.S.S.R., and the first if measured by the percentage of national electricity needs satisfied by nuclear power. It has generated profits and 150,000 jobs for the French economy - as well as strong criticism for its failure to require adequate safeguards against Third World countries' use of its nuclear exports to develop nuclear weapons.

France Goes Nuclear

Framatome's growth is rooted in the history of France's Commissariat a l'Energie Atomique (CEA), a government agency set up by DeGaulle in 1945 in order to direct French nuclear research and develop an independent French nuclear weapons capability.

In the 1960's, CEA priorities shifted to developing a French nuclear power industry. Framatome's licensing relationship with the U.S.'s Westinghouse Corporation played a central role in France's strategy of gaining access to U.S. reactor technology and integrating it with the centerpiece of France's self-reliant nuclear program, the fast breeder reactor.

Seven companies of the Belgian -controlled Empain Schneider Group - a heavy industry and armaments group - founded the Societe Franco-American de Construction Eeonomique, or Framatome, in 1958 primarily to win a license from Westinghouse to use its reactor design. Framatome's first reactor prototype - a joint Belgian-French venture - gave the company the experience which later helped it become France's sole supplier of light water reactor systems.

In 1970, Electricite de France (EDF), the state-owned electrical utility, placed its first reactor orders with Framatome. Despite a world slump in demand for new nuclear reactors. Framatome prospered throughout the 19-Os - in part because of France's decision, following the 1973 oil crisis, to switch from oil-based to atomic generation of electricity .

Throughout the 197Os, the French nuclear industry remained only nominally in private hands. The CEA and EDF - Framatome's best customer - heavily influenced questions of technology and industry structure. Both favored an eventual monopoly of reactor construction by Framatome because it lowered costs by standardizing equipment. The CEA also sought to compete successfully with American nuclear monopolies in European and Third World markets.

During the next five years, EDF awarded Framatome contracts to build 38 nuclear power reactors throughout France. By 1981, the company's order book stood at 38 small 900 megawatt power plants, and its workforce had grown from 100 to 5000 in ten years.

Framatome's success fueled intense investor interest - by Westinghouse as well as French public and private interests. In 1972, Westinghouse purchased a 45 percent share in Framatome. Fifty-one percent was owned by Creusot-Loire, a steel and engineering firm which is still the largest company in the Empain Schneider Group, and 4 percent by other Empain Schneider companies. Westinghouse, hoping to gain a competitive edge in Europe's nuclear industry markets, sought a majority interest in Framatome. The CEA, however, blocked the takeover attempt, fearing a loss of French nuclear independence. In 1975, it took over 30 percent ownership from Westinghouse.

By 1981, France was pressing for even more control of Framatome. In January, Westinghouse agreed to sell its remaining 15 percent share to Creusot-Loire, which now owned 66 percent, and to cede complete marketing independence to Framatome. In February, the Belgian Baron Empain sold his 35 percent interest in Creusot-Loire to Paribas, a French government-linked banking group.

The May 1981 Socialist electoral victory in France intensified calls for greater government control of Framatome. A January 1982 company reorganization simultaneously strengthened French public and private control of the company by allowing Creusot-Loire to increase its share of the company while increasing CEA say in the running of the firm.

The reorganization also integrated several new subsidiaries into Framatome, further centralizing the French nuclear industry and tying the company closer to the government - and to public debate over French nuclear policy. Framatome currently owns 70 percent of Novatome, the company operating France's controversial fast breeder reactor program. It also joined France's nuclear fuels agency in creating two nuclear fuel companies.

Proliferating Abroad

Framatome illustrates many of the inherent economic and political contradictions within the nuclear power industry. Despite its government-approved monopoly of domestic nuclear reactor construction, it could not recover its tremendous investment costs - a result of the expensive, capital-intensive nature of nuclear technology - or turn a profit without eventually selling on the global market. Although Framatome won some early contracts for reactors in Europe, by the mid-1970s most industrial countries barred nuclear imports to protect their own nuclear industries and jobs. The only market left was the Third World - and selling there was likely to increase proliferation risks.

Framatome had several advantages over its U.S. competitors for Third World markets: it specialized in providing complete nuclear fuel cycle systems including reactor, fuel, and equipment, and only took six to seven years to complete construction against a U.S. average of 11 years. Its use of U.S. technology allowed it to substitute for U.S. companies in the Third World.

In 1975, Framatome negotiated the first major sale of a French-made nuclear reactor - to Iran. The $1.2 billion contract for two 900 megawatt power stations reportedly included supplying fuel reprocessing technology. (Earlier sales of this technology by France to Pakistan and South Korea had provoked strong U.S. protests in the wake of India's 1974 explosion of a nuclear device utilizing materials from a U.S.-supplied nuclear power station.) However, the units were never built and the contract was eventually cancelled in 1979 following the Shah's overthrow.

Barely five months later, Framatome won a contract to build South Africa's first nuclear power reactors at Koeberg, north of Capetown, edging out Westinghouse. Under terms of the seven -year contract, Framatome and two other French companies agreed to provide the nuclear technology, equipment, and fuel rods for two 950 megawatt units. South Africa's Electricity and Supply Commission (ESCOM) supplied the enriched uranium for the rods and funded construction. Financing came directly from the South African government and indirectly from transnational bank purchases of ESCOM bonds.

Until recently, Framatome kept close to its schedule, due for completion by 1983, motivated in part by contract terms allowing payment only after the reactors go on line. Framatome's progress, however, was interrupted first by the U.S.'s continued refusal to enrich uranium for the reactors, as previously agreed, due to South Africa's refusal to sign the Nuclear Non Proliferation Treaty. Then, in December 1982, start-up was further delayed when the reactor's control system was damaged by bombs planted by guerrillas of the African National Congress, the leading South African national liberation movement.

In 1979, Framatome signed an agreement with the Korean Electricity Power Co. to build two nuclear reactors. Currently under construction, the units have come under strong criticism - most recently in a World Bank-commissioned study - because of gross health and safety violations and inadequate training of Korean nuclear technicians who will operate the plants (see MM, February 1983). Equally serious have been past concerns over possible Korean diversion of civilian-use nuclear materials to a nuclear weapons program. U.S. Congressional investigations in 1978 revealed secret Korean plans during the early 1970s to develop nuclear weapons using a Frenchsupplied processing plant.

Framatome, however, has experienced major financial problems with nuclear exports. Most Third World countries cannot afford the expense and have had to scale down their nuclear construction program plans. Korea, for example, dropped plans for 31 reactors from its program. Also, the need to sell nuclear exports has created a buyer's market, undercutting prices. France earned less from its later sales to Taiwan and South Korea than from its South Africa deals.

In recent years, Framatome has been unable to conclude any concrete contracts. Taiwan backed out of a tentative contract in 1982, and Mexico's debt crisis has shelved indefinitely Framatome's hopes of winning a slice of its plans for a $32 billion, 20-reactor program. Because nuclear fuel and reactor hardware are France's second largest export and a mainstay of the French economy, however, Framatome has continued actively to seek out new markets. In 1981, following the first Arab nuclear conference, Algeria and Morocco reportedly approached France to conduct feasibility studies of nuclear power development. In 1982, Egypt employed French companies to study possible nuclear reactor sites. In early 1983, Gabon's president requested French help in building a nuclear power plant, the first black African country to do so. France and China recently signed a joint accord on sharing nuclear information; Framatome reportedly has a good chance of winning a major stake in building China's first nuclear power reactor. In late 1982, South Africa was reportedly considering ordering two new nuclear power stations; a new contract could mean more than $1 billion and hundreds of jobs for Framatome.

Ambivalence and Hard Choices

The Socialist Party has shown ambivalence toward France's domestic nuclear industry and nuclear export sales. Influenced by local protest, its preelection platform advocated nationalizing the industry and sharply reducing atomic reactors on order. Barely two months after the 1981 election, the new government accordingly halted work on five plant sites, promising a rigorous look at domestic nuclear energy and a possible public referendum on the issue. Government officials indicated they would oppose any future nuclear dealings with South Africa. Mitterand, however, trod lightly on nationalization, hesitant to alienate foreign investors further or undermine Framatome's profitability and employment opportunities.

In reality, the new government was as split as its supporters over nuclear policy. Members of communist unions backed further expansion to maintain the over 300,000 jobs that depend directly or indirectly on the nuclear industry. Other socialists, however, favored reducing nuclear power and sought to close down France's fast breeder reactor.

In October 1981, the Mitterand government reversed its policy and supported expansion of France's domestic and international nuclear sales over strong objections from many disillusioned supporters. The French Industry Minister is now studying plans to concentrate the French nuclear industry even more by allowing EDF to become part owner of Framatome. Such a reorganization would allow Framatome's ailing parent, Creusot-Loire, to raise desperately-needed capital by selling off its shares. But it would also create a giant reactor/supplier-turbine/operator monopoly. EDF ownership would be the first time a public customer has owned a share in its reactor supplier.

Framatome is bracing for employment problems in mid-1984 if EDF orders are reduced further. Without increased demand, Framatome workers - and those in related industries - could face severe layoffs.

The Socialist government faces hard choices in the coming few years. Efforts to curb nuclear proliferation may hinge on the struggle within the French administration over how to balance proliferation concerns against the industrial health of its nuclear industry, rising unemployment, and increasing balance of payments problems from reduced exports. France's original decision to emphasize nuclear power was inspired primarily by nationalistic aversion to dependence on U.S. technology. Its economic consequences, however, have created unpalatable options for France and Framatome: either increase domestic reactor construction despite lack of demand in order to maintain employment levels at Framatome and among subcontractors or to cut back on unneeded reactors, risking deepening economic recession and unemployment, or, finally, emphasize overseas marketing of nuclear reactors, risking nuclear weapons proliferation.

It is unclear which of these options France will eventually choose. But Mitterand, who has not shown himself above seeking political advantage, may well take whichever route best preserves his standing.

Table of Contents