EDITORIAL PAGE — A strange alliance

In its battle against a U.S.-Russia deal over uranium, Canadian producers (a small band comprising Cameco, Uranerz Exploration and Mining, Cogema and Rio Algom) have found an unlikely ally — a group of U.S. producers. This newfound friend seems an unlikely defender, for the deal is designed to benefit Russia and the U.S. alike, while effectively constricting supplies from other countries.

The deal went like this: The U.S. government agreed to buy stockpiled Russian uranium below market prices. The Russians were delighted with this arrangement because previously no Russian uranium could cross the U.S. border. Washington was pleased because it believed it had found a way to reduce the huge Russian stockpile with minimal disruption to the market. To offset the impact of Russian imports on domestic producers, the U.S. government promised to buy its uranium at prices above the spot market. Thus, the blended price did not mean above-market prices for U.S. uranium consumers. So the deal appeared to satisfy everyone whose interests are of concern to the U.S. government. Sadly, however, that governent seems to be concerning itself less and less with how its trade policies affect Canada, its largest trading partner. (And since we’re on the subject of how Canadian companies are treated in the U.S., we would like it noted that we were appalled at the shabby treatment afforded American Barrick by Interior Secretary Bruce Babbitt when he was forced to approve its patents for the Goldstrike mine.) But back to the uranium deal. Left out in the cold were foreign companies, such as Canadian uranium producers. Over time, the lost revenue to a company like Cameco would be significant.

But Washington isn’t just crowding out a portion of Canadian imports and in the process violating the rule that all companies in NAFTA countries be accorded equal treatment. It is also subsidizing homegrown producers by paying above-market prices for their output. This is about as flagrant a violation of NAFTA as any we’ve seen come down the pike.

Earlier, we had called on the Canadian government to take this up under the dispute settlement mechanism in the Free Trade Agreement — which it has. However, that can be a long, drawn-out process. And nobody knows how the case might turn out, regardless of how persuasive the Canadian producers’ argument seems.

But worse yet, there may be more at stake than just the Russia-U.S. deal. We have read that the U.S. might also entertain variations on this uranium deal with central Asian countries such as Kazakhstan. If any such deal is modeled after the earlier one, Canadian producers can expect increased tightening in the U.S. market.

But now, as mentioned at the outset, help is arriving from the most unlikely source — several U.S. producers who have launched a lawsuit, in the U.S. Court of International Trade, against the deal. Why are some of the U.S. miners — the supposed beneficiaries — fighting it? Apparently, some will not benefit under the deal unless they have ties to the Russian industry and thus stand to gain from matched sales.

And as you might imagine, the need for a Russian connection has split the U.S. camp into two factions — the haves and have-nots.

So, what once seemed, to Washington, a brilliant solution to the thorny issues of Russian uranium stockpiles and a moribund U.S. uranium industry now seems to have blown up in its face.

Oh what a tangled web we weave . . .