Fortress Brexit: PRC Asks UK to Honor $23B Nuke Plant Deal

The best laid plans for the PRC to build nuke plants in the UK go astray after Brexit.

The United Kingdom's referendum outcome to separate itself from Europe may arguably portend a move towards greater economic isolationism from the rest of the world. While some Brexiteers portray the move as an opportunity to strike deals with non-Europeans unshackled from the fetters of having to move together with 27 other European states, we shall wait and see. Certainly, the early evidence is not altogether promising.

One of the supposed benefits of going it alone for the UK is to take advantage of closer ties with fast-growing Asian nations. However, in the aftermath of Brexit, its new Prime Minister Theresa May has put into question the building of a new nuclear power plant in the UK with Chinese (and French, actually) involvement. To this the PRC warns of strained ties:

China has a clear message for Britain: Dump a joint nuclear power project and you'll pay the price. A deal for a Chinese state-owned company to help build a nuclear plant in southwest England was announced amid much fanfare during a visit by President Xi Jinping last October. But the $23 billion Hinkley Point project is being reviewed by new British Prime Minister Theresa May, who succeeded David Cameron in the wake of the Brexit vote in June.

That's not sitting well with China. "Right now, the China-U.K. relationship is at a crucial historical juncture," China's ambassador to Britain, Liu Xiaoming, wrote in an article for the Financial Times. "I hope the U.K. will keep its door open to China and that the British government will continue to support Hinkley Point — and come to a decision as soon as possible so that the project can proceed smoothly," he added. 

Actually, the preliminary project will be French-majority invested, with a second to follow that's China-majority invested. It's the latter that the PRC is eyeing more:

Under the deal announced in October, China General Nuclear Power Corporation (CGN) would have a 33.5% stake in the power plant. France's EDF (ECIFY) will hold the rest. The bigger prize for China, though, is a related deal to build another nuclear power plant some 60 miles northeast of London, using its own reactor technology. It would have 66.5% of that venture.

May hasn't given much away about her reasons for delaying the decision on Hinkley Point. But the deal was controversial from the start, with critics warning that giving China access to vital infrastructure could compromise national security. The plan has also come under fire for guaranteeing an electricity price way above market levels.

Ah, good ol' "national security" concerns--usually isolationism or protectionism masquerading as a threat to law and order. The broader point is that Theresa May was the home secretary of her predecessor David Cameron when the nuke deal was signed. Why didn't she object over "national security" concerns then? Certainly she had a right to do so as a cabinet member whose portfolio encompasses this matter. (For the PRC viewpoint, see its UK ambassador's Financial Times op-ed.)

Even if the terms of the deal were not good for the UK which many critics say, the overall impression is made that the UK is not engaging further with but rather withdrawing from international economic interaction. You can bet that isolationist Brexiteers are very happy about what's happening. Giving the French a kicking would be an added benefit for them.

UPDATE: Also note the US is investigating nuclear espionage involving the Chinese firm in question. Still, my belief is that the UK had all the time in the world to vet this deal. Not honoring it now post-Brexit vote doesn't exactly inspire confidence among the UK's would-be trade partners that it remains open for business.