The economic case for UAE’s nuclear power

No less an authority than the Financial Times has just reported the UAE is set to become the first nuclear state in the Arab world.

I thought we had this more or less confirmed last week with the visit of President Sarkozy of France, and the announcement of a commercial deal between the two nations to build and equip nuclear power plants in the Emirates, but on a closer reading the FT took the story a step further with the suggestion the Abu Dhabi Government would produce a policy document for discussion by the UN Security Council, arguing the case for nuclear power.

When this document is submitted, much of the discussion will hinge on whether the UAE enriches uranium itself, or imports processed fuel. There is no need to go into that particular argument here – it is safe to say, I believe, that the UAE would not want to risk the controversy Iran has provoked over its decision to process fuel itself, and the allegation that this could be used for military purposes. But the UAE policy paper will also want to spell out what it sees as a conclusive economic case for the development of nuclear power, and that is the argument it has to win in the debating chamber of world opinion.

On first glance, it is easy to see why the international community might be sceptical about the rush to nuclear power in the region. After all, the Gulf holds the largest reserves of oil and gas on the planet, and Abu Dhabi is especially well endowed with gas. With such an energy asset on hand, why go for the nuclear option?

I am grateful to the Gulf Research Council (GRC) for a persuasive answer to this question. In a recent research paper, the GRC suggested that by developing nuclear energy the GCC states “are multiplying their options in terms of their energy resources. They gain a strategic advantage by reducing their reliance on a sole source of power and having a viable alternative – nuclear power – for energy generation”.

The argument is the UAE, and other states if they take the same route, will be able to reduce domestic oil consumption and release more oil to the international market. With crude hovering near the $100 mark, it makes sense even for oil-rich states to sell crude and invest the profits in alternative sources of energy.

At the same time, demand for water and electricity is expected to rise rapidly. In the UAE, which already consumes more water per head that anywhere else in the world, experts see average demand for water and electricity to grow by 10 per cent per year. In Dubai, on the brink of a population explosion fuelled by economic growth, it is calculated annual demand growth will reach 12 to 14 per cent by 2010. With oil revenues in decline in the emirate, it makes sound economic sense to consider nuclear power as the source of energy for electricity and desalination plants.

This sounds pretty conclusive to me. Dubai has successfully initiated the strategy of diversifying away from oil dependence. A move to nuclear power is just a logical extension of this policy into the energy sector.

The UAE’s chosen partner in this enterprise, France, has shown that there is nothing to fear from an efficiently planned and professionally developed nuclear industry. The UAE should be the first to show these lessons can be applied in the Gulf.