France’s $1.6 billion uranium deal with Mongolia faces delays

A debate about protecting strategic resources in Mongolia risks delaying the finalization of the agreement until after elections in June, according to two people familiar with the matter who asked not to be identified. Progress has also been hampered after the Asian country’s chief negotiator stepped down, a third person said, meaning the deal had to be redrafted.

French uranium producer Orano SA reached an outline accord to develop and operate the Zuuvch-Ovoo mine in Mongolia in October during a trip by the nation’s president, Khurelsukh Ukhnaa, to Paris to meet with counterpart Emmanuel Macron.

A final investment agreement was expected to be signed by the end of last year, with production due to start in 2028.

A long delay or even cancellation of the project would be a blow to state-controlled nuclear group Orano, which has said the plan is a key step in widening supplies as global demand picks up. It has uranium mining operations in Canada and Kazakhstan, as well as in Niger, where its business has been put in jeopardy by last year’s military coup.

Mongolian government representatives were not immediately able to comment on the contract delays. Orano said in an emailed statement that talks are continuing and that authorities have expressed strong motivation to finalize the agreement as soon as possible.

A series of supply setbacks in the past year including the Niger coup, which disrupted shipments to Europe, has pushed spot uranium prices to 15-year highs. The world’s biggest producer of the metal, Kazakh state-owned miner Kazatomprom, cut its production forecast last month, citing a shortage of acid needed to process the ore. That’s happening amid a revival of interest in nuclear power as governments try to decarbonize their economies to meet emissions targets.

France said in October it wants to give landlocked Mongolia, which is situated between Russia and China, “the means to benefit from greater strategic sovereignty” in the face of “two extremely powerful neighbors.”

Russia supplies more than 80% of the petroleum products Mongolia needs, while China is the main buyer for Mongolian exports. Beijing is adding atomic plants at a rapid pace.

Tensions around access to critical raw materials and strategic equipment have flared up between the West and Russia after President Vladimir Putin sent troops to Ukraine two years ago. The US and Europe have imposed severe sanctions on the Russian economy, prompting the Kremlin to turn to China, Turkey and Arab countries to keep its industry afloat.

Russia has also become much more hostile to any Western influence on its neighbors, including Central Asian nations and Mongolia. Meanwhile, Moscow has displaced Paris as a leading partner in several African capitals in the wake of military coups, including in Niger.

Soon after Mongolia’s president returned from Paris in October he was paid a visit by a Russian delegation led by Deputy Prime Minister Viktoria Abramchenko. In December, Russia also agreed with Mongolia on a plan to build a small modular reactor, according to state news agency TASS.

When Russia cut energy supplies to its neighbor in December, citing an incident at a hydro power plant, Mongolia had to limit daily power consumption, highlighting its dependence.

Mongolian Energy Minister Battogtokh Choijilsuren visited Moscow the same month to discuss the possibility of uninterrupted supply of petroleum products with Russian Deputy Prime Minister Alexander Novak. Earlier in February, Russia said it’s treating Mongolia in a preferential manner when it comes to oil-product prices.