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