Australian reserves of recoverable uranium are one third larger than previously thought, according to a new report by Geoscience Australia.

The whopping findings come on the back of intensified spending on uranium exploration, from around $40 million in 2005 to over $80 million in 2006.

Spurred by the rising price of yellow cake and countries such as China looking for a greener solution to power generation, resource companies are vying for a piece of the pie. But it’s not just miners dreaming of a yellow-coloured future, it’s the Australian government as well.

It is ramping up uranium exports to the Asian giant despite the fact our closest ally, the United States, is keeping a cautious eye on the nuclear capabilities of the Chinese military.

In fact, in April last year, the Howard Government gave licence to Australian producers to export up to 20 thousand tonnes of uranium to China on an annual basis. But if the relationship between the US and China were to sour, Australia could find itself in a very uncomfortable position.

The Bush administration’s discomfort with a rising China is already evident. It opposes their nuclear military, and claims they have sold nuclear technology despite being signatories of the Nuclear Non-Proliferation Treaty. And China’s newfound interest in the world energy market is also causing headaches. In 2005, the American administration intervened to keep China’s involvement in the world energy market to a minimum by preventing a takeover of Unocal, a US oil company.

But China is like a bear coming out of hibernation. No longer content with its old policy of energy self sufficiency, it’s a nation ready to feed. For the Chinese, buying uranium from Australia is much more than an energy deal, it is a breakthrough into the sensitive technology market from which western politics has long kept them excluded.

And despite potentially damaging criticism about nuclear weapons proliferation, waste, and mining expansion, the Howard Government embraced the deal. It was a bold move considering rejection would have had no ill consequence. In fact, it would have brought praise from the anti-nuclear lobby, a powerful voice in Australian politics, and done nothing to dent China’s hunger for Australian resources such as iron ore, coal, or natural gas.

But it was a decision that points to Australia’s economic future, something that won’t even be held back by security alignment with the US. With Australia holding 38 percent of the world’s uranium and the price of yellow cake having surged from $12 a pound in 2003 to around $40 at the time of the deal (it now sits at around $100 a pound), it is a deal too good to resist. Arguments from the Greens and the anti-nuclear lobby couldn’t counter the Government’s traditional strength: the economy. Of course, there was the environmental issue as well.

Firmly refusing to ratify Kyoto because of its failure to haul in developing emitters, it made not only economic, but “green” sense for the Government to support China with clean power production. With a growing carbon footprint that now rivals the US and dire atmospheric pollution, China is desperate for an alternative to coal which generates over 90 percent of its electricity. Not only that, predictions state that by 2020 China will spend US$390 billion, or 13 per cent of GDP, to treat diseases caused by coal combustion pollution. But the Chinese don’t want to stop the boom, and Australia is well placed to benefit. In fact, the government signed on despite no foolproof method to ensure the uranium is never funnelled into the Chinese military.

But in real terms, the deal is not quite the economic boon it appears. China is already Australia’s second biggest export market after Japan, and even when producers reach the capacity of the deal, it will contribute less than two percent to Australia’s total exports. So with limited economic gain, why would Australia put itself into a potentially compromised position with the US?

It is because the sale of uranium to China is not a stand alone agreement. It is one part of an overall strategy to tie the Australian and Chinese economies closer together.

And the willingness to make sacrifices to achieve this aim were already clear. In 2004, the government made a significant policy back flip when Foreign Affairs Minister Alexander Downer said that Australia would not be obliged under the ANZUS treaty to support a US intervention in Taiwan. Only eight years earlier, it had given full support. Shying away from an agreement which has tied Australia and the US as military ally and friend since 1951, it represents a reluctance to let anything sour the economic benefit that might be gained from a booming China.

Even in environmental terms, the agreement is not as easy to justify as it might seem. At best, the 20 thousand tonnes of uranium will contribute only four percent to China’s energy needs, hardly enough to make inroads into their greenhouse gas emissions, or tidy their toxic atmosphere. Considering China has almost doubled its consumption of world energy since the late 1980s, now sitting second to the US, Australian uranium will do little to feed its insatiable appetite and weaken its dependency on coal.

But despite the anti-nuclear lobby, and the fact that another “Jabiluka” would again spell political trouble, the public is warming to China. In a poll conducted by the Lowy Institute in 2005, 69 percent of respondents felt positive towards China, and 68 percent thought Australian foreign policy takes too much account of the US.

So while China is not yet a political ally, it is fast becoming an economic friend, if not so already. The agreement clearly demonstrates that despite being geopolitically and culturally isolated, Australia doesn’t want to miss out on a thriving Asia. And it’s not just one side of politics with their noses following the economic wind. Kevin Rudd and Labor have thrown aside the party’s three mines policy, giving producers confidence to invest despite the outcome of the election.

But does this mean that ties with the US will gradually severe? Highly unlikely. Australia’s dependence on the US as a military ally will not diminish. Perhaps with a rising China, it could increase. The common cultural political and cultural values will also keep the countries united. However, with the Australian economy becoming more Asia reliant, the likelihood of economic ties with China taking precedence over political ties with other nations will probably increase. What the political consequences will be remain to be seen.

In all, the deal reflects an agenda to put Australia in a position to benefit from the changing global economy in which China is becoming more central. And while the Howard Government has ignored anti-nuclear opposition, security fears, and demonstrated a lazy attitude to China’s nuclear behaviour, it is seemingly not without support.

Dr Jiaping Wu researches global integration and social and economic transformation with the School for Social and Policy Research, Charles Darwin University. This article is based on Beyond an energy deal: Impacts of the Sino-Australia uranium agreement by Dr Jiaping Wu, Professor Stephen Garnett, Professor Tony Barnes and is published in Energy and Policy.

Peter Fray

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