More deglobalization: Russia cuts uranium exports to U.S.

Last week the United States authorized the use of American-made long-range missiles by Ukraine against Russia which the Russian government says risks escalation to a nuclear conflict in the almost three-year-old war. The Russian government reacted by announcing an unnerving shift in nuclear doctrine. It also announced reductions in uranium exports to the United States. By how much and for how long, the government did not say.

In light of what can only be seen as a proxy war in Ukraine between the United States along with its NATO allies and the Russian Federation, it is passing strange that the United States still relies on Russia for 27 percent of its enriched uranium. Oddly, the reaction in the spot market for uranium was a 4 percent slump in prices. Most customers for uranium—primarily nuclear power plants—have stockpiles and long-term contracts, so an immediate effect on spot prices was unlikely. But the price of uranium mining stocks soared in anticipation of greater pressure on mine supply outside Russia, the world’s sixth largest producer.

This development highlights a vulnerability among metal importers across the globe. When relations between a large exporter of minerals and a large importer of them goes south, the consequences can be significant. While it’s true that the exporter loses some revenue, critical material and energy shortages can have large effects. Inadequate uranium fuel for nuclear power stations could eventually lead to loss of generating capacity.

The United States is uniquely vulnerable to such cutoffs as I explained in a 2022 piece about the federal government’s efforts to increase U.S. self-sufficiency. The United States has a long list of mineral import dependencies that include nickel, copper, tungsten, cadmium, palladium, aluminum and silicon. None of those dependencies are going away anytime soon.

When it comes to overall mineral production, China leads and Russia is third. Down in 10th place is Iran. All three countries are increasingly problematic sources of minerals for the United States and its allies as trade sanctions now weigh heavily on Russia and Iran, and a trade war with China appears to be brewing under the newly elected Trump administration.

While the United States is second in overall mineral production, it consumes so much of its own production that it remains a large importer as noted above.

With the end of the Cold War in the early 1990s, it was thought that a unified global market would henceforth operate uninterrupted and under peaceful conditions. That lasted until the COVID-19 pandemic led to snarled supply chains and subsequent rising tensions with Russia and the invasion of Ukraine led to trade sanctions. The result was a broad and ongoing shift in trade patterns as well as an increasing drive for domestic production, both to bolster domestic job growth and reduce vulnerability to loss of imports.

A move toward domestic production can work if you have a large endowment of the resources needed to supply manufacturing and service industries. But, as I’ve pointed out previously, many Western economies have become focused on finance over production. Here is the problem in a nutshell as I explained in the context of what I believe is an ongoing trend toward deglobalization:

Integration of the world economy favors those who control finance and can therefore extract ever larger payments from centralized systems under their ownership or authority. Deglobalization—which was already underway due to the effects of the pandemic on supply lines and is now speeding up due to the [Ukraine-Russia] war—will increasingly favor those who control stuff. And, it turns out that stuff is far more important to supporting our daily lives than the manipulations of the titans of finance.

Extracting stuff and the financial rewards that spring from it from faraway countries can be a highly profitable approach to maximizing one’s share of the world’s wealth—until it isn’t. Russia’s restrictions on uranium exports to the United States are just one more indication that the trend toward deglobalization is ascendant. Pretending otherwise is a recipe for failure and increasingly, impoverishment. Just ask the Germans who lost access to cheap supplies of pipeline Russian natural gas in the wake of the Ukraine-Russia war and have now faced two years of economic contraction.