May 18, 2006

Intelligence Brief: Brazil's Nuclear Ambitions

Brazil's Science and Technology Minister Sergio Rezende told the press on May 6 that Brasilia has launched a uranium enrichment center for fueling its power plants. Brazil's first nuclear enrichment facility, located in Resende (about 140 kilometers (87 miles) outside Rio de Janeiro), will "save Brazil millions of dollars it now spends to enrich fuel at Urenco, the European enrichment consortium," the minister said. Brazil's move has great industrial, geopolitical, and financial significance.

With regard to industrial aspects, it is important to recall that the South American giant is already one of the world's leaders in alternative energy. For three decades, it has consistently promoted the use of ethanol in place of gasoline for use in automotives; therefore, ethanol now accounts for as much as 20 percent of the Brazilian transport fuel market.

Although the use of carbohydrates instead of fossil fuels is not a recent discovery, Brazil's determinacy to industrially implement ethanol as a commercially-viable alternative may pave the way to decisive changes in the automobile market because the South American state is one of the most promising emerging markets globally.

Brasilia is wagering on a combination between alternative fuels like ethanol and nuclear power. Such a mix is similar to recent French plans to launch a new generation of nuclear plants while boosting renewable energies and bio-fuels.

The geopolitical consequences of Brasilia's moves, however, are even more important. Early this year, Brazilian authorities claimed their country is already well ahead on the path to energy independence. Therefore, Brazil's entry into the nuclear club is a crucial step in its struggle to end dependence on fossil energies. At a time of increasing regional and global conflict over energy security, Brasilia's decision will greatly enhance its political independence from both fossil energy producers and the great powers that deeply influence energy geopolitics.

Brazil is South America's potential hegemon because of its size, resources, demography, and geographic location. Its future independence from Venezuelan and Bolivian oil and gas will make the country less vulnerable from potential blackmail by such medium regional powers, thus reinforcing its position as a continental leader. [See: "Bolivia's Energy Nationalization Causes Concern in Brazil and Argentina"]

Moreover, should Venezuela succeed in improving its economic fundamentals decisively as a result of its present oil-based energy policy, it can be expected that Caracas will use fresh financial strength to rapidly follow Brazil's path and try to access the nuclear club in its turn. This development would have serious implications for the region.

Since the energy crisis -- due to growing oil and gas demand, fears of peak oil capabilities, and geopolitical instability in oil-rich regions-- is nowadays structural, Brazil's nuclear projects consolidate a global trend: atomic power is once again gaining momentum. Although costs to finance nuclear plants and their security are often considered exorbitant, atomic energy enjoys growing popularity 20 years after the Chernobyl disaster, as it appears more viable than hydrogen-based solutions. [See: "Intelligence Brief: French Energy Policy"]

The Brazilian civilian nuclear program will also constitute a thorny political-diplomatic issue for the U.N. and the global political community. Brazil's purposes are in fact formally identical to those of Iran's. The U.S. and their main allies, however, do not believe that Iran would stop its nuclear enrichment capabilities to serve solely civilian projects because of Iranian political culture and structures, and its sour relations with Israel.

As Brazil goes nuclear, Tehran will not miss the opportunity to highlight the incomprehensible difference of U.S. and Western diplomatic attitudes toward the two countries. As a result, military action against Iran's nuclear infrastructure will be even more difficult to justify in front of worldwide Muslim public opinion.

From a financial point of view, Brazil's move needs to be carefully examined by global operators. As nuclear projects gain impetus worldwide, energy commodity hedge funds will get involved in the economic game that will follow. The induced industrial sector and investments will also be under scrutiny by financial decision makers and investors.



The Power and Interest News Report (PINR) is an independent organization that utilizes open source intelligence to provide conflict analysis services in the context of international relations. PINR approaches a subject based upon the powers and interests involved, leaving the moral judgments to the reader. This report may not be reproduced, reprinted or broadcast without the written permission of inquiries@pinr.com. All comments should be directed to content@pinr.com.

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