| In light of Toshiba?s recent proposed | | | | meeting in Paris in February 1972 to |
| acquisition of Westinghouse Electric from the | | | | establish a uranium-producer?s alliance, in |
| government-owned British Nuclear Fuels | | | | essence a de facto uranium cartel. Others |
| (BNFL), historians may be reminded of former | | | | suggest it was formed in April 1972, after |
| Westinghouse Chairman Robert Kirby?s | | | | the Canadian government reportedly gave its |
| litigious international outcry and prolonged | | | | blessing. Canadian author Gordon Edwards |
| battle over secretive and illegal price | | | | (Canada?s Nuclear History) bluntly wrote, |
| manipulation by a global uranium cartel. In | | | | ?The purpose of the cartel was to secretly |
| the 1970s, Westinghouse, determined to | | | | manipulate world uranium prices using a phony |
| capture the world market of building nuclear | | | | bidding system. Hidden quotas were |
| reactors, offered dirt-cheap nuclear fuel as | | | | established by representatives from Canada, |
| part of its incentive to get sales from | | | | France, Australia, South Africa and Rio Tinto |
| utility companies. The company?s 27 utility | | | | Zinc (London Stock Exchange: RIO).? Namibia |
| customers had locked in agreements with | | | | and Niger were also included in the alliance, |
| Westinghouse to provide them with 65 million | | | | as was Gulf Oil, at least according to Robert |
| pounds of U3O8 over the next twenty years, | | | | Kirby of Westinghouse. |
| well into the 1990s. Those contracts set off | | | | |
| one of the most curious legal battles of the | | | | When the U.S. government re-affirmed its |
| 1970?s, ultimately reducing Westinghouse to a | | | | trade embargo in March of that year, a |
| shell of the powerhouse it once was. | | | | subsequent uranium cartel meeting took place |
| | | | in Johannesburg, South Africa in May 1972. At |
| In recent weeks, Toshiba (London Stock | | | | an Ottawa conference on May 28, 1972, it was |
| Exchange: TOS; Tokyo Stock Exchange Ticker | | | | reported that Jack Austin, then deputy |
| Code: 6502) has been strongly criticized for | | | | minister of energy, voiced his concern the |
| the Westinghouse acquisition, and may sell as | | | | cartel could be considered illegal under |
| much as 49 percent of the deal to two other | | | | Canadian law. Nonetheless, the politicians |
| Japanese firms and a smaller stake to an | | | | gave the uranium cartel a green light. |
| American firm. Toshiba?s CFO, Sadazumi Ryu | | | | |
| said the company would pay for some of its | | | | The alleged price manipulation was paying |
| acquisition costs within three years out of | | | | off. In 1973, the spot uranium price doubled. |
| current cash flow plus float debt to about | | | | By 1976, it doubled again and stayed above |
| 115 percent of equity. Will Toshiba repeat | | | | $40/pound for nearly four years. It was |
| the mistakes made by Westinghouse in the mid | | | | around that time the alleged cartel disbanded |
| 1970s during the last uranium bull market? | | | | to avoid international anti-trust laws, which |
| | | | Westinghouse was arguing after unleashing a |
| Today, Toshiba aims its sights on the | | | | tsunami of litigation. Westinghouse was |
| lucrative Chinese nuclear energy market, | | | | desperate to escape its liability over the |
| which on the surface appears more ambitious | | | | promise of cheap uranium to utilities. In |
| than the U.S. civilian nuclear program of the | | | | March 1976, the U.S. Department of Justice |
| 1970?s. Toshiba wants to be a major | | | | began investigating possible infringements of |
| beneficiary of China?s aggressive plans to | | | | U.S. anti-trust laws by the alliance of |
| expand the country?s nuclear energy program. | | | | uranium producers. By mid 1977, a federal |
| And why not? Uranium prices have soared the | | | | grand jury had been formed to pursue the |
| past few years. Spot uranium rocketed in 2005 | | | | investigations and possibly initiate criminal |
| at an even faster degree than in 1975. That | | | | proceedings. |
| was the year when Westinghouse?s Robert Kirby | | | | |
| was told by his doctor to not even bother | | | | In a letter dated July 12, 1977, the U.S. |
| giving up his chain-smoking habit. Things at | | | | Attorney-General wrote to the U.S. District |
| Westinghouse had gotten that bad. | | | | Attorney for the Eastern District of |
| | | | Virginia, explaining the quandary this |
| The head of the Pittsburgh-based conglomerate | | | | international episode had caused and |
| failed to grasp what was behind the | | | | discussed invoking immunity to obtain |
| escalating uranium price during the 1970s. | | | | witnesses who would talk about the alleged |
| His Westinghouse incentive plan sounded great | | | | conspiracy: |
| when spot uranium sold for $6/pound. However, | | | | |
| at $40/pound, Westinghouse got stuck with | | | | ?These persons are not likely to come within |
| potential liabilities of more than $2 billion | | | | the personal jurisdiction of the United |
| (1970s dollars) because of his offer to | | | | States courts so long as the Department of |
| provide the utilities with cheap fuel. By | | | | Justice continues a sitting grand jury |
| July 1975, Kirby began blaming the world?s | | | | investigation of the international uranium |
| uranium cartel, which he believed manipulated | | | | industry; (3) These persons are British |
| the spot price higher to piggyback his | | | | subjects and we have determined that it is |
| company?s development plans. Across from | | | | highly unlikely that their testimony could be |
| Kirby?s offices in Pittsburgh?s Golden | | | | obtained through existing arrangements for |
| Triangle were the offices of Gulf Oil, a | | | | law enforcement co-operation between the |
| uranium supplier, whom he believed to be a | | | | United States and the United Kingdom; (4) The |
| member of the uranium cartel. By September | | | | Department of Justice has been largely unable |
| 1975, Westinghouse announced a shortfall of | | | | to obtain information from these foreign |
| 25,000 metric tons of uranium, and claimed | | | | persons about the subject matter of this |
| ?commercial impracticability? in honoring its | | | | investigation?? |
| nuclear fuel commitments to the 27 utilities. | | | | |
| And the lawsuits began. | | | | By mid 1978, Westinghouse Electric?s |
| | | | complaint against Rio Tinto Zinc in the |
| According to a special report in the | | | | United Kingdom floundered in that country?s |
| Pittsburgh Post-Gazette, Kirby?s ?suspicions | | | | court system. Obtaining evidence in England |
| heightened when, in late 1976, he received | | | | was markedly different from the U.S. style of |
| copies of documents suggesting Gulf and 28 | | | | depositions. |
| other suppliers had conspired to form a | | | | |
| cartel to keep Westinghouse out of the | | | | Conclusion |
| uranium business.? The documents were the | | | | |
| minutes of a private meeting of uranium | | | | During this litigious period, Westinghouse |
| suppliers held in Australia. In a bizarre | | | | settled with several utilities, but continued |
| twist of fate, the whistleblower came in the | | | | to pursue the lawsuits. By 1979, Judge |
| form of Friends of the Earth, which offered | | | | Merhige in the U.S. District Court for the |
| Westinghouse additional documents if the | | | | Eastern District of Virginia, Richmond |
| nuclear power plant manufacturer would help | | | | Division, ordered Westinghouse and the |
| the environmental group release jailed | | | | utilities to equitably resolve their |
| members in the Philippines. Kirby ran with | | | | differences. Westinghouse agreed to |
| what he had, ignoring their request, and | | | | concessions that ultimately cost the company |
| began a course of intense litigation. The | | | | nearly $1 billion, but locked up the |
| lawsuits were eventually consolidated and | | | | utilities as long-term customers by providing |
| heard in a federal district court in | | | | parts and engineering services for up to 25 |
| Virginia. During the course of the | | | | years. In quiet out-of-court settlements, the |
| litigation, Westinghouse took its grievances | | | | uranium suppliers paid Westinghouse nearly |
| to London?s House of Lords, setting | | | | $100 million and supplied the company with |
| international case law about the discovery | | | | uranium. |
| process in litigations. | | | | |
| | | | Besides, there was another cartel in the |
| What really happened in the 1970?s? | | | | 1970?s, which posed a far greater risk to the |
| | | | developed nations. From the oil embargo, |
| Kirby and Westinghouse were caught up in an | | | | which began 1973 and throughout the decade, |
| international trade dispute, during a world | | | | the OPEC oil cartel overshadowed the tiny |
| revival of the uranium market. Uranium prices | | | | uranium cartel. Saudi King Faisal?s ?oil |
| had collapsed in December 1959 when the U.S. | | | | sword? had a far greater impact on the energy |
| government placed an embargo on the purchase | | | | climate, Gross Domestic Product, inflation |
| of foreign uranium for domestic purposes. The | | | | and quality of lifestyles, than an anxious |
| embargo came after the nuclear weapons | | | | alliance of uranium producers trying to meet |
| build-up of the 1950s had peaked. In 1959 | | | | production costs and peddle stockpiled |
| alone, the U.S. bought 20,000 metric tonnes | | | | inventory at higher prices. Not only was the |
| of uranium for the country?s weapon | | | | oil crisis a more serious affair, but another |
| procurement program, about 61 percent from | | | | un-related episode tanked the price of |
| Canada. Within a week after the embargo, | | | | uranium. |
| global uranium prices fell by 75 percent. | | | | |
| Twenty-four out of the 28 Canadian uranium | | | | Just as the decade was coming to a close, on |
| producers and processors left the business. | | | | March 28, 1979, a water pump broke down at |
| | | | the Three Mile Island nuclear plant, about |
| Two Canadian crown corporations remained with | | | | ten miles southeast of the Pennsylvania state |
| viable uranium assets to mine and sell. | | | | capital. It was an unexpected event, |
| Eldorado Mining and Refining Ltd had stakes | | | | heightened Hollywood-style, as the accident |
| in mines at Port Radium, Key Lake and Rabbit | | | | coincided with the opening of a new movie |
| Lake. The provincially owned Saskatchewan | | | | called The China Syndrome, starring Jane |
| Mining Development Corporation owned had | | | | Fonda, Michael Douglas and Jack Lemmon. In |
| stakes in Key Lake, Cluff Lake and Down Lake. | | | | short order, many Americans were persuaded |
| Before 1942, Eldorado Mining (later re-named | | | | that events within the movie were somehow |
| El Dorado Nuclear Ltd) had been a privately | | | | related to the Three Mile Island event. This |
| owned radium company, which in that year was | | | | was a Hollywood PR man?s dream. Fanning the |
| taken over by the Canadian government and | | | | media flames to capture a larger box office |
| made into a crown corporation. During World | | | | gross, a basically nothing episode (in terms |
| War II and for the next decade, the company?s | | | | of loss of human life, since no one died from |
| raison d?etre was to produce uranium for the | | | | the reactor accident) was transformed into an |
| U.S. and U.K. nuclear weapons programs. | | | | earth-shattering campaign against the entire |
| | | | nuclear energy industry. Ironically, more |
| By 1956, both countries looked elsewhere for | | | | died in the movie (one, Jack Lemmon?s |
| their uranium. By 1965, Canada?s production | | | | character) than as a direct result of the |
| plummeted to 3,000 tonnes from a peak of 12, | | | | Three Mile Island accident (0 reportedly |
| 000 tonnes annum in 1959. Canada?s uranium | | | | died). |
| exploration came to a standstill, and only | | | | |
| three mines remained operational. Boom town | | | | Hysterical commentary from that era bespoke |
| Elliot Lake became a ghost town. Lacking | | | | of a nuclear accident, which would melt down |
| buyers, a self-serving Canadian Prime | | | | to the earth?s core, as one character in the |
| Minister Lester Pearson announced in 1965 | | | | movie suggested. Unable to distinguish what |
| that Canada?s exported uranium would only ?be | | | | was movie fiction from scientific reality, |
| used for peaceful purposes only.? Nearly a | | | | the movie?s message left a horrifying memory |
| year earlier, the U.S. government had banned | | | | in the collective minds of the general |
| the enrichment of foreign uranium for | | | | populace. A general panic followed, and |
| domestic use, pre-empting any newsworthy | | | | nuclear energy was badly tainted by the |
| value to Pearson?s announcement. | | | | accident. As the momentum for building U.S. |
| | | | nuclear power plants came to a grinding halt, |
| Between 1964 and 1967, more than sixty | | | | overflowing inventories for the raw material |
| nuclear reactors were ordered for the U.S. | | | | to fuel those power plants had once again |
| civilian nuclear energy program. | | | | nullified the uranium exploration and mining |
| Westinghouse?s newly designed light-water | | | | sector. It took more than two decades to draw |
| reactor created excitement within the | | | | down those built-up uranium inventories, |
| industry. During that time, Canadian uranium | | | | about as long as it has taken for the public |
| exploration was taken out of mothballs and | | | | to once again accept nuclear energy as a |
| production resumed. Hardball shenanigans in | | | | safer, cleaner alternative to fossil-fuel |
| Washington kept the uranium ban intact, and | | | | powered electricity. |
| global uranium prices reached an all-time | | | | |
| nadir of $4/pound. Canada was shut out of the | | | | Why is today?s uranium bull market different? |
| U.S. nuclear fuel cycle market, and Ottawa | | | | Is the current and spectacular rise in spot |
| was forced to stockpile a reported $100 | | | | uranium prices different today than it was in |
| million of uranium during the Nixon | | | | the early to mid 1970?s, when an alleged |
| presidential administration. By late 1971, | | | | uranium cartel reportedly bid up prices to an |
| Prime Minister Trudeau?s cabinet had reached | | | | artificial level? Is that same factor |
| the end of their rope failing at every step | | | | occurring during the current steep rise in |
| to remove the ban by diplomatic means. | | | | the spot price of uranium? Will Toshiba sink |
| | | | into the same quicksand, during the balance |
| News reports suggest a number of | | | | of this decade, as Westinghouse Electric once |
| uranium-heavy countries held an initial | | | | did? |