ISSUE 26
24. - 30. 04. 2023
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- Security situation update
- Is the Global South really neutral?
- Security guarantees for Ukraine from NATO
- Rome Conference and the next steps for recovery
- Hopes for the Ukrainian economy during and after the war
- Ukraine plans to build up to 20 small modular reactors: pros and cons
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You can find a PDF version of this issue suitable for printing at the bottom of the newsletter.
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SECURITY SITUATION UPDATE |
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Russian forces are focusing their main efforts on launching offensives in the Lyman, Bakhmut, Avdiivka, and Maryinka directions. They are also increasing efforts to block the T0504 highway between Kostyantynivka, Chasiv Yar, and Bakhmut. The use of TOS-1A systems in the area of Avdiivka and the western part of Donetsk Oblast is unlikely to provide a decisive advantage for the Russian forces on the battlefield. The Russian troops have intensified the use of FAB-500 aerial bomb strikes on Ukrainian strongholds in the urban areas of Bakhmut.
Military Media Center citing General Oleksandr Syrskyi, Commander of the Eastern Group of the Armed Forces of Ukraine, reported that the situation remains complicated, but that the Ukrainian Armed Forces had managed to counterattack and regain positions in some parts of the city. Intensive combat operations continue on the Bakhmut front, but Russians have not succeeded in breaking through the defense of Ukrainian positions, according to Ukrainian military leadership.
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Russia has intensified missile attacks. On 28 April, Russia carried out massive missile strikes on Ukraine, including Kyiv and other cities in central and southern Ukraine. Some missiles struck civilian targets in Uman, Dnipro, Kremenchuk, and Mykolayiv. In an early-morning missile strike on an apartment block in the city of Uman (Cherkasy oblast) 23 civilians were killed, including six children. After a pause lasting 51 days, the enemy also launched another missile attack on Kyiv.
According to the information being clarified, missiles were fired from strategic aviation planes. Preliminary data indicated that 11 cruise missiles were destroyed in the airspace of Kyiv by Ukrainian air defense. In addition to the missiles, two more UAVs were shot down. As a result of falling debris, a local power line was cut off, and the road surface was damaged in the Obolon district of the capital. There were no casualties among the civilian population and no destruction of residential facilities or infrastructure.
During the night of 1 May, Russians repeated missile attacks, activating air alerts across Ukraine. In Dnipropetrovsk region, seven missiles were shot down by Ukrainian air defense, but few missiles hit their intended targets – in Pavlohrad, 19 multi-story residential buildings, 25 private houses, six school and pre-school education institutions, five shops, and an industrial facility were damaged. Ukraine’s air defense was also activated in the city of Kyiv and its surroundings. According to Ukrainian Commander-in-Chief, Valeriy Zaluzhnyi, the Russian Armed Forces attacked Ukraine using strategic aircraft. Nine Tu-95 jets were deployed from the area of Olenegorsk (Murmansk Oblast, Russia), and two Tu-160 jets from the Caspian Sea. A total of 18 Kh-101/Kh-555 air-launched cruise missiles were launched, 15 of which were destroyed.
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The Ukrainian leadership continues to raise expectations about the counter-offensive. Ukrainian President Volodymyr Zelenskyy claimed that the widely anticipated spring counteroffensive in Ukraine will push on even without Western fighter jets in the skies. Ukrainian Defense Minister Oleskii Reznikov also stressed that "in a global sense", the Armed Forces of Ukraine are ready for a counter-offensive.
"The training is being completed. In addition to having the weapons and equipment, our military must master them. We have very modern systems, especially in terms of the “armored fist”. I would like to remind you that in addition to the tank coalition, which includes primarily Leopard 2 and Challenger, Leopard 1 will arrive a little later." Reznikov said. He said that Ukraine is expecting Abrams tanks, but there won’t be enough time to use them in this counteroffensive. "Generally, speaking in terms of percentages, we are ready. Then it’s up to the General Staff, the command. As soon as there is God's will, suitable weather, and decisions of the commanders - we will do it," Reznikov said.
However, the main directions of Ukraine’s future actions are still unclear. On 29 April, a massive explosion was registered in the Crimean port city of Sevastopol. According to the Ukrainian military intelligence service, the blast, likely caused by a drone, destroyed ten tanks loaded with 40,000 tons of oil destined for the Russian Black Sea fleet. “This work was part of the preparations for the large-scale offensive that everyone is waiting for,” Natalia Humeniuk, a spokeswoman for the Ukrainian army’s Southern Command, was quoted by local media as saying. However, the stance of military experts remains cautious. Although they anticipate some Ukrainian military successes, they concede that these will likely be insufficient to critically change the situation on the ground, or force Russia to withdraw.
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IS THE GLOBAL SOUTH REALLY NEUTRAL? |
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Ukraine being in great need of arms, countries of the Global South become a focus of attention during the search for ways to provide more arms to Ukraine to fight against Russian occupants. However, many of these countries often repeat Russian and Chinese rhetoric, as well as increasing cooperation with them. For example, in the last three months, India and Russia signed agreements on increasing cooperation not only in trade, but in the military sphere; Iran’s president visited China; the South African Republic (SAR), China, and Russia conducted naval exercises, and Brazil’s president became a vocal supporter of “peace negotiations” that suggest Ukraine abandons its citizens and its territorial integrity. Russian influence in the Global South is alarming, as the actions and positions that are taken – or not taken – by these countries could influence the course of Ukraine’s fight against Russian occupants.
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Russia has not abandoned its aim of spreading malign influence in Europe and North America, but it also continues to invest in efforts to keep populations in Africa and South America on its side via multi-language media propaganda and disinformation directed at local audiences, and Russian historical narratives in education systems. Russian humanitarian policy abroad is based on the concept that Russia is a separate civilization, supporting countries worldwide against Western (neo)liberalism. It is extensively focused on Asia, the Middle East, and Latin America, where Russia manipulates historical memory. The public and academia in previously colonized nations of South America, Africa, and Asia have had little to no familiarity with or recognition of the colonizing character of Russia, especially in Eastern Europe and the Caucasus. Russia still continues its colonial efforts, though this has been ignored by the Global South. In addition, Russian influence over social elites in politics is prominent across the Global South. This way, Russia has been cultivating “friendly nations” to avoid isolation.
Most countries of the Global South present themselves as nonaligned, and their policies regarding Russia’s war against Ukraine as neutral. This neutrality serves only to aid the aggressor. In fact, Global South states are members of various alliances and organizations – the BRICS being an example. In the UN, such members regularly abstain from voting to condemn Russian aggression against Ukraine. India, for example, has increased its oil imports from Russia while citing the importance of “the UN Charter, international law, and respect for the sovereignty and territorial integrity of states".
The term Global South, not being an endonym, is criticized but remains relevant - while Global South states have a lot in common - they share anti-western sentiments, but not a common range of socio-political values. The foreign policies of these developing countries focus on receiving maximum benefit from their diverse partnerships. The African Union has maintained close contact with Russia, with high-ranking official visits, and repeatedly blamed the West for the war and sanctions, while benefiting from Western support for their states' development. The share of Russia-supporters and those with neutral positions are highest in the Global South countries - more than 50% in Latin America and the Middle East. African nations are not united in voting for UN resolutions condemning Russia's war against Ukraine - only a minority usually supports Ukraine by their votes.
In many African states (Mali, Central African Republic, Sudan, etc.) Russia has supplied weapons and mercenaries who spread their terrorist influence and frequently violate human rights. Possible arms supply to Russia is a point of serious concern - states might decide to supply weapons to Russia for both ideological and economic benefits, as well as due to pressure from Moscow. Egypt reportedly paused a plan to secretly supply up to 40,000 Sakr-45 rockets to Russia after US diplomatic efforts and instead expressed readiness to produce artillery ammunition to sell to the US for transfer to Ukraine.
In turn, it demanded advanced US military equipment such as fighter jets and air defense systems. As of now, reportedly neither of these developments has occurred, but remains a possibility that Egypt has already supported the Russian military by returning SA-23 surface-to-air missile systems it received from Moscow before, but now there are prospects that Egypt can indirectly aid the Ukrainian military. US diplomatic efforts resulted in Morocco transferring spare parts for T-72 tanks for use by Ukraine. In South America, Colombia and Brazil have refused to supply arms to Ukraine while having a surplus, the latter rejecting requests of Ukraine and Germany. Argentina, which has supplied the largest volumes of humanitarian aid to Ukraine out of all South American states, also expressed unwillingness to supply weapons to Ukraine, while the country has condemned Russia’s full-scale invasion and expressed readiness to contribute to President Zelenskyy’s peace formula and to restoring justice.
Argentina, Peru, Mexico, and Ecuador all have Soviet-made weapons that can be used by Ukraine against the Russian army. Advanced Western-produced weapons and weapons systems make the most change for Ukraine’s efforts, however, the lack of enough artillery systems could be answered by additional supplies from countries who have not yet taken a position on the war.
Ukrainian diplomacy is developing in this direction as well. For example, in October 2022, Ukraine’s Foreign Minister Dmytro Kuleba organized a trip across Africa, and he has a second trip planned - the Ukraine-Africa summit in the summer. Kuleba stated that some states declared that they will not participate in the Russia-Africa summit planned for June. As a long-term strategy, Ukraine will need more initiatives to engage with these countries. Currently, the key task is to produce tangible results in a timely manner - to prevent Russia from being able to restore military strength and resources, including by cutting any possible supply channels. While Ukraine counters Russia on the battlefield, the role of countries supporting Ukraine is crucial, - in this case, the diplomatic efforts of the West with their partners in the Global South demonstrate their significance.
The need to engage with the states of the Global South is evident, but its scale is debatable, as even among NATO allies and EU states, there remains a degree of hesitancy. Ukraine’s diplomatic efforts are therefore unsurprisingly directed at encouraging more unwavering support for Ukraine. The defeat of Russia would be the best demonstration for countries of the world of the victory of sovereignty and freedom. This would considerably impact the positions of the countries of the Global South. However, first Ukraine must win the war.
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SECURITY GUARANTEES FOR UKRAINE FROM NATO |
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Poland, the Czech Republic, and Slovakia called on NATO to provide security guarantees for Ukraine and to set out a "clear and credible path for Ukraine's membership" at its July summit. This was written in an article by the Polish, Czech, and Slovak PMs Mateusz Morawiecki, Petr Fiala, and Eduard Heger in Foreign Affairs magazine. The leaders of the Baltic states made similar statements, calling for concrete progress on Ukraine's accession to NATO at the Vilnius summit.
Earlier, British Prime Minister Rishi Sunak called for the finalization of security guarantees for Ukraine before the July summit. During NATO Secretary General Jens Stoltenberg's visit to Kyiv, Volodymyr Zelenskyy said that Kyiv expects a package of security guarantees from NATO members and concrete steps that would politically fix Ukraine's membership in the Alliance. In turn, the NATO Secretary General, Jens Stoltenberg, assured that all member countries agreed that Ukraine would eventually join the transatlantic military Alliance once the war ended. However, the Vice Speaker of the Hungarian Parliament, Dora Duro, said that Ukraine's entry into NATO without significant security risks is possible only with the consent of Russia. The Ukrainian Foreign Ministry responded that Ukraine does not need Russia's permission to join the Alliance.
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Security guarantees for Ukraine have been actively discussed since the beginning of Russia's full-scale invasion of Ukraine. However, neither partner countries nor international organizations have proposed a specific document regarding this issue yet. In September last year, the Office of the President of Ukraine presented the Kyiv Security Compact (KSC) - a document on a joint strategic partnership between guarantor countries and Ukraine. The package of guarantees includes military, financial, infrastructural, technical, and informational preventive measures, as well as measures to be taken immediately in case of a new invasion of Ukraine. The document also provides a broad package of sanctions against the aggressor state. According to the KSC, all guarantor countries are NATO members, with Australia being the only exception. According to experts, the document is not perfect because it does not contain legally binding obligations. But on the positive side, its provisions can be used as a basis for new initiatives. The purpose of the KSC is to provide temporary security guarantees for Ukraine until it joins NATO. In fact, this is what more than ten NATO member states and Ukraine are currently demanding.
Further advocacy of this initiative before the Vilnius Summit and the presentation of practical security guarantees for Ukraine are important for several reasons. First, the communication of NATO's support for Ukraine with a clear plan will signal to Moscow and Beijing that the West is united and consistent in its policy. Secondly, a public campaign to support Ukraine's Euro-Atlantic integration and provide it with sufficient security guarantees is needed by NATO member states themselves. First of all, to strengthen Euro-Atlantic unity. The NATO Secretary General's statement that all Allies agree on the need to accept Ukraine into the bloc is undoubtedly positive rhetoric, but in practice, it isn't easy to imagine unanimous support – with Hungary's position. Thirdly, practical steps by NATO will motivate Ukrainian society and the army. Fourthly, NATO's security guarantees are a convincing argument for investors who will invest significant money in rebuilding Ukraine.
In Vilnius, Ukraine may receive certain security assurances. But these will not be the guarantees that NATO countries give each other. We could expect a political declaration on strengthening NATO's military and technical support for Ukraine, systematizing the Ramstein platform's work, or other cooperation scenarios. The declarative nature of such a document is a minor drawback. Last year, the UK provided security guarantees to Sweden and Finland. The signed agreements are political declarations that the UK and the two countries will aid each other's armed forces if they are attacked.
In the case of Ukraine, the security guarantees should be filled with practical content that will strengthen the defense capabilities of the Ukrainian army, improve interoperability with NATO forces, bring Ukraine's victory closer, and establish long-awaited peace in Europe.
However, this is only a temporary option that partner states can provide. The only real guarantee of Ukraine's security is Article 5 of the Washington Treaty on Collective Defense, which NATO membership would provide.
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ROME CONFERENCE AND THE NEXT STEPS FOR RECOVERY |
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On 26 April 2023, a bilateral Conference on the Reconstruction of Ukraine was held in Rome with Ukrainian and Italian government representatives and more than 500 Italian companies. The parties are considering cooperation in sectors such as infrastructure and transport; energy (including renewable energy sources and networks) and environment; joint projects on space and aviation development; healthcare, digitalization, and services; and agriculture. According to Denys Shmyhal, Ukraine expects €1 billion in financial support from the Italian export credit agency, SACE, in addition to the €500 million already provided. Italian Prime Minister Giorgia Meloni noted that the Italian government will support the private sector and cooperation between the enterprises of the two countries.
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The big picture behind the Rome conference is that the Ukrainian government and international partners are working to make available $14.1 billion for Ukraine’s rapid recovery in 2023. This figure is backed by the World Bank Rapid Damages and Needs Assessment (RDNA) released in March 2023. The World Bank identifies five critical sectors for rapid recovery: housing, energy infrastructure, critical and social infrastructure, humanitarian demining, and revival of business activity. $3.3 billion will be available from the state budget while the World Bank should accumulate an additional $2.2 billion via the Ukraine Recovery Trust Fund (URTF).
While the sum of $14.1 billion is backed by the World Bank, some of Ukraine’s donors are questioning whether the Ukrainian government has enough capacity to manage such big funds. Before the war, the absorptive capacity of Ukraine in infrastructure was between $4 and $4.5 billion a year. Now the government is talking about $14 billion. Human resources is a big burden in this regard as there has been a significant brain drain due to the number of people displaced abroad and internally. According to the UNHCR, 8.1 million displaced persons from Ukraine were recorded in Europe while more than five million Ukrainians are internally displaced.
Another issue to tackle is providing necessary security guarantees for businesses coming to Ukraine. International investors will not come if there is a risk that Russian rockets could destroy their businesses. The Ukrainian government and partners are developing a mechanism for providing war insurance. To this end, the Multilateral Investment Guarantee Agency (MIGA) has established a trust fund in order to stimulate international private-sector investments in the recovery and reconstruction of Ukraine. Japan has made the first contribution to this fund worth $25 million and MIGA hopes to attract $300 million by the end of the year. Similar mechanisms exist in the UK and Germany aimed at providing insurance for national businesses for their investments in risky environments. Both countries are considering using their mechanisms in attracting investments for Ukraine’s recovery.
Another major milestone in the so-called “Financial Rammstein” is the upcoming Ukraine Recovery Conference in London which will be held in June. The main focus of the conference is the economic and social stabilization of Ukraine. Agreements will have to be reached within those two tracks - mechanisms for attracting funds for rapid recovery of critical and social infrastructure and stimulating business activity.
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HOPES FOR THE UKRAINIAN ECONOMY DURING AND AFTER THE WAR |
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Ukraine's agro-industrial complex and IT were actively developing before the full-scale offensive and were a significant share of the Ukrainian economy. The Russian attack in 2022 negatively affected all areas of business. As the domestic market and the country's solvency decreased, the Ukrainian government focused on developing sectors that provide external income to the country and are the basis of export potential. This list includes particularly agriculture and IT.
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Over the years, Ukraine has developed effective business models in these two areas. The agriculture sphere allows international companies to be involved in Ukrainian business. This strengthens the economy and helps develop new sectors. In turn, thanks to the development of new IT solutions, the agricultural sector has increased its efficiency. This approach demonstrated its effectiveness before a full-scale war and brought significant profits to the country. With the beginning of active hostilities on the territory of Ukraine, the agricultural sector lost 25% of the cultivated area, and its direct losses reached more than $8 billion. Despite this, the export of agricultural products last year became the main source of foreign exchange earnings for Ukraine (except for international aid). The IT sector has not yet shown a severe decline. This happened due to the execution of old orders. The services exports in 2022 increased by $400 million compared to 2021.
Currently, agriculture and IT are two areas in which Ukraine is adapted to the international market. They are already actively represented in the European market. Thanks to this, the country and its businesses have the opportunity to prepare for future accession to the EU single market. Additionally, these sectors currently support the economy significantly. They could become the main drivers of post-war recovery. The government and international partners understand this and try to support business representatives in these areas.
Despite the war, Ukrainian business has not stopped. Entrepreneurs cooperate with the state and international partners and are adapting to new conditions quickly. However, it is essential not only to support the business but also to help it cooperate and develop synergies. Big Data analytics and automation played a crucial role in easing the impact of the war on the agricultural sector. Implementing more IT solutions in agricultural enterprises would also increase production volume and its final value and help solve supply chain inefficiencies, significantly saving time.
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UKRAINE PLANS TO BUILD UP TO 20 SMALL MODULAR REACTORS: PROS AND CONS |
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The Ukrainian operator of nuclear power plants - National Nuclear Energy Generating Company (NAEK) Energoatom, and the American company Holtec International signed an agreement on the construction of up to 20 nuclear power units with small modular reactors (SRMs) in Ukraine by 2029. It is about the construction of SMR-160 SMRs - 160 MW pressurized light water reactors that use low-enriched uranium. The parties stated that the construction of the SMRs in Ukraine will contribute to the strengthening of the country's energy security and will provide an opportunity to replace the thermal power facilities destroyed by Russian attacks and achieve the goals of mitigating the effects of climate change.
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Back in 2017, the head of Holtec International, Chris Singh, appealed to the President of Ukraine with a proposal to create a hub in Ukraine for the distribution of SMR technology with equipment production for them being done by Ukrainian enterprises. The agreement between Energoatom and Holtec International on the introduction of SMR technologies in Ukraine was signed in 2019. In March 2023, Energoatom and the Rolls-Royce SMR company also signed a memorandum, indicating an intention to search for future opportunities for the deployment of SMR in Ukraine.
In March, the Minister of Energy of Ukraine Herman Halushchenko said that as part of the "green transition", Ukraine is considering the possibility of building up to 20 SMR instead of rebuilding thermal generation power units destroyed during the war. For this purpose, Energoatom cooperates not only with the mentioned American Holtec International and the British RolIs Royce, but also with the American Westinghouse (which offers its AP-300 reactor), NuScale, and several other companies with which relevant memoranda have been signed.
This news drew extensive criticism. The main argument is that not a single SMR has been built in the world yet. It will take decades to build them. And instead of making immediate decisions about the damaged Ukrainian energy sector, the Ukrainian authorities are flirting with foreign companies about long-term and expensive projects.
It is noteworthy that mainly the opposition to the idea of SMR for Ukraine is coming from Germany, where the economic feasibility of the announced project is questioned. DW interviewed energy experts and presented several arguments against the proposed project(s). Also, it should be noted that SMRs are many times less powerful than the nuclear reactors of existing nuclear power plants in Ukraine (we wrote about Ukrainian nuclear power plants earlier - they will still have to be decommissioned in 10-20 years). In the first stage, when SMRs enter the market, they will be more expensive in terms of the cost of energy produced than existing large nuclear reactors. And they can become cheaper only when the production of modules acquires a large industrial scale, and it can't be predicted when that would happen. The precise cost of such a reactor is not yet known, but the preliminary estimated cost of the 160-MWt reactor at 2020 prices is more than $1 billion, excluding the cost of construction loans. One of the authors of the study notes that the modular reactors built in China and Russia exceeded their budget by three to four times, and accordingly, it is extremely difficult to attract investors to projects with such risks. Germans assure that renewable energy projects are currently much more promising and predictable for investors. Such statements may also be dictated by the fact that Germany itself shut down its nuclear power plants two weeks ago, ending the era of atomic energy for itself, fulfilling the promises made by Angela Merkel back in 2011. However, two-thirds of Germans disagree with the decision to decommission the last nuclear power plant. Obviously, in light of its own difficult decisions to stop the operation of nuclear power plants, Germany simply cannot support the development of nuclear energy in other countries.
Last fall, when the agreement between the United States and Ukraine on the implementation of a pilot project for the construction of SMR became known, the State Department announced that the project aims to demonstrate Ukraine's innovative leadership in the field of clean energy through the use of advanced technologies.
SMRs are mini-nuclear plants that can be placed in different areas and generate electricity for individual settlements. Energy production in such reactors occurs in the usual way: uranium rods using a nuclear chain reaction heat water in the internal circuit, and steam is formed, which drives turbines, generating electricity. SMR developers insist that their inventions are absolutely safe and do not cause any harm to the environment. Compared to existing reactors, the proposed SMR designs are generally simpler, and the safety concept is usually based on passive systems, i.e. without human intervention. Thanks to this, in some cases, the probability of dangerous radioactive emissions into the environment and the population's contact with them in the event of an accident is eliminated or significantly reduced. The development of the SMR system is supported by the IAEA.
Ukrainian experts are also skeptical of MMR, saying that such installations are more needed in those areas where there is no developed energy supply network. There are no such non-electrified regions in Ukraine. A reactor with a capacity of up to 300 MW is enough for a city of a million people. But if you plan to replace all Ukrainian thermal power stations with SMR, then you need several dozen of them. There are also caveats regarding the safety of mini-nuclear plants. And the more safety barriers there are, the higher the cost of the reactor plant. This installation might be very safe, but not economically reasonable compared to other types of energy generation.
The only company that has so far received a state certificate for the use of a small modular reactor is the American NuScale. The permit was issued in August 2020. Until 2029, it announced the construction of only the first prototype of such a reactor. More than $100 million was attracted from investors from South Korea. With these funds, the construction of a prototype reactor should begin in the US. The company plans to build a nuclear power plant with several specified nuclear reactors by 2030 in the US state of Utah.
All experts agree that it may take decades to build such small reactors in Ukraine. Instead of talking about SMR - the prospects of which are vague, and the cost of which is exorbitant - in the short term, gas turbine generators with a capacity of 30 to 100 MW are needed in all regional centers as an option to replace outdated or damaged thermal power plants (TPPs). The development of electricity production from biomass and other types of renewable energy is also a promising direction.
Since SMR technologies are innovative, they do not comply with the norms and rules in force in Ukraine. Therefore, the task of developing relevant documents and laws regarding the construction and operation of the MMR, as well as the management of radioactive waste and spent nuclear fuel, arises. Construction of any new facility associated with potential risks to the population is accompanied by corresponding opposition from the public. If we are talking about a new nuclear power plant, even a small one, we should expect an increase in public interest in this topic and, perhaps, a wave of protests. In order to reduce public resistance, it is necessary to involve the public in the issue of NPP construction at the early stages of project development, long before construction begins, and demonstrate transparency and respect for society. The decision on the construction of the MMR should be made by the state at the highest level. Innovative technology also has certain risks. If the decision is finally adopted, in order to minimize these risks, it will be necessary to develop the appropriate legal framework and establish the basis for the implementation of the project. This will take more than one year.
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WAR IN UKRAINE: LESSONS LEARNED |
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Russia's current war against Ukraine demonstrated the readiness of the democratic world to unite in the fight for freedom and liberal values. However, there are democracies all over the world in need of protection against autocracies willing to challenge international order. One year from the start of full-scale invasion, we introduce you the report “War in Ukraine: Lessons identified and lessons learned“, which analyzes policies and practices that have impacted Ukraine’s resilience in key sectors. Outcomes of this research can be used as recommendations for other democracies building resilience against conventional, hybrid, or other threats (e.g., natural disasters), from Europe to the Pacific.
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