Waiting traps

Published : Nov 07, 2008 00:00 IST

The shift to an import-led nuclear programme would make India vulnerable to the vagaries of the global market.

in New Delhi

THE signing of the India-United States Civil Nuclear Cooperation Agreement, or the 123 Agreement, on October 10 by Minister for External Affairs Pranab Mukherjee and U.S. Secretary of State Condoleezza Rice marks the final step in a paradigm shift in the development of nuclear energy in the country.

From the hitherto strongly self-reliant and indigenous approach, the Indian government is seeking to increase the generation of nuclear power by following an import-led growth path, notwithstanding the constraints and vulnerabilities that characterise such an approach as well as the realignments geopolitical, strategic and scientific that the country would be forced to make.

In particular, the signing signals the opening of the door to nuclear imports from the U.S. after 34 years. Indias nuclear power programme kicked off with an India-U.S. bilateral agreement in 1963 to set up two 160 MWe nuclear power plants (NPPs) at Tarapur, Maharashtra, but the cooperation ended abruptly following Indias Pokhran-I test in 1974. It led to the stoppage of fuel supplies to Tarapur and the emergence of a regime of controls on the export of nuclear technology and goods to non-signatories to the Nuclear Non-Proliferation Treaty (NPT), such as India.

Even though a self-reliant approach ultimately to nuclear technology development was part of Homi J. Bhabhas vision, the Department of Atomic Energy (DAE) was forced to take to this route quicker than envisaged. In retrospect, it proved to be highly beneficial for the DAE and the country. Now this approach is being marginalised by a growing strategic alliance with the U.S. and the consequent Manmohan Singh-George Bush joint statement of July 18, 2005, of which civil nuclear cooperation has become the totem pole.

From the limited perspective of the import of additional nuclear power generation capacity, the DAE seems to be far from clear about the extent of imports it envisages in the years to come. A figure of importing 20,000 MWe by 2020 is quoted often, particularly in the documents of the Planning Commission and in the statements of the Prime Minister. However, in recent times, the DAE has even begun talking of importing 40,000 MWe by 2020.

Even before the possibility emerged of importing from around the world, the DAE had set itself a target of 20,000 MWe by 2020, which included 8,000 MWe on the basis of the hope that Russia may supply 6,000 MWe in addition to the 2,000 MWe currently being installed at Kudankulam in Tamil Nadu.

Either of the two revised import scenarios that have been articulated in the wake of the impending possibility of global nuclear commerce with India would imply that the Indian nuclear energy programme would be driven predominantly by Light Water Reactors (LWRs) based on (low) enriched uranium (LEU) instead of the natural uranium-based Pressurised Heavy Water Reactors (PHWR), which have been its mainstay.

The Indian programme would then become highly vulnerable to the vagaries of the global nuclear market, in terms of capital cost (which at about $2 million/MWe is already much higher than in the case of PHWRs), uranium cost (which has escalated rapidly in recent times) and disruptions in supplies. All these factors are highly sensitive to changes in global geopolitics and the non-proliferation order set by the NPT and related controls on nuclear transfer as dictated by the guidelines of the 45-member Nuclear Suppliers Group (NSG).

India has been allowed to do nuclear commerce by an amendment to the NSG Guidelines (Frontline, October 10).

The crossing of this hurdle had, in principle, laid the premise for India to engage in nuclear trade with countries such as Russia, France and Japan. Trade with the U.S., the prime mover of the NSG waiver, could begin only after the U.S. Congress approved the 123 Agreement.

Of course, there seems to have been a tacit agreement between the two governments that India would not talk to other suppliers before the agreement was approved. Now that this has also happened, it enables an ostensible level playing field to potential suppliers. (The 123 Agreement enters into force after the exchange of appropriate diplomatic notes between India and the U.S. as required under Article 16(1) of the Agreement.)

Of course, having given a written assurance on September 10 that the Government of India intended to source a minimum of 10,000 MWe from U.S. nuclear energy firms on the basis of mutually acceptable technical and commercial terms and conditions, India could not have negotiated with others.

One could argue that the caveat in quotes amounts to not giving a firm commitment. But the manner in which the U.S. pushed the sale of its Westinghouse AP1000 reactors to China in 2006 despite similar financial terms from Russian and French suppliers, not to mention their better technologies, is evidence enough that the U.S. could resort to similar tactics here as well (The Hindu, January 26, 2007).

More pertinently, while the government may perceive the NSG waiver to be clean and unconditional, the contours of global nuclear trade with India will in all likelihood be determined by the parameters set by the 123 Agreement. These are quite constraining, notwithstanding the counter-spins being given by the government and the bulk of the media.

Even though India has to enter into bilateral agreements with France and Russia, the NSG waiver provision of consultations among NSG members and the provisions in the Hyde Act as well as the U.S.-India Nuclear Cooperation Approval and Non-proliferation Enhancement Act of October 8, 2008 the RosLiehtinen-Berman-Lugar Act seem to ensure that other potential suppliers too played by the rules set by the U.S. (The RBL Act signifies Congress formal approval of the 123 Agreement.)

This is an agreement, remarked Pranab Mukherjee at the signing ceremony, [that] reflects a careful balance of rights and obligations [of the two countries]. The agreement has been passed by the U.S. Congress without any amendments. Its provisions are now legally binding on both sides once the Agreement enters into force. We look forward to working with U.S. companies on the commercial steps that will follow to implement this landmark agreement.

In his remarks to the press soon after, he reiterated these points and added, We intend to implement this agreement in good faith and in accordance with the principles of international law and I am confident that the U.S. will also do the same (emphasis added).

The Ministers remarks on the legally binding nature of the agreement and its implementation in accordance with the Vienna Convention are a consequence of President Bushs remarks in his letter to Congress while transmitting the Agreement (and the associated documents as required by the Hyde Act) on September 10. In that, with regard to fuel supply assurances, he had said (Frontline, October 10): [T]he agreement records certain political commitments. The text of the agreement does not transform these political commitments into legally binding commitments because the agreement, like other U.S. agreements of this type, is intended as a framework agreement.

These remarks had led to a counter-statement on September 12 from the Ministry of External Affairs (MEA), which said: The rights and obligations of both India and the U.S. are clearly spelt out in the terms and provisions of the 123 Agreement. Once this Inter-Governmental Agreement enters into force, the Agreement would become a legal document in accordance with well-recognised principles of international law and the Law of Treaties [the Vienna Convention].

This war of words continued when Bush, while signing the RBL Bill into law, said: The Bill I sign today establishes the legal framework for [the] agreement to come into effect. The Bill makes clear that our agreement with India is consistent with the Atomic Energy Act (AEA) and other elements of U.S. law. The legislation makes no changes to the terms of the 123 Agreement. The legislation does not change the fuel supply commitments that the U.S has made to India. The agreement also grants India advance consent to reprocessing, which will be brought into effect upon the conclusion of arrangements and procedures for a dedicated reprocessing facility under IAEA safeguards (emphasis added).

The government of India believes that cooperation will be governed by the provisions of the 123 Agreement only and that the fuel supply assurances given therein imply that the U.S. is legally bound to provide fuel or help India create a strategic fuel reserve for the lifetime of the U.S.-supplied reactors. Similarly, it believes that the reprocessing consent given in the agreement amounts to upfront grant of reprocessing rights.

But the U.S. interpretation of the agreement has been greatly at variance with Indias, and Bushs remarks do not in any way allay Indias apprehensions, contrary to some commentaries in the media.

If the Hyde Act provided the basis for the U.S. perspective on the agreement, the RBL Act not only reinforced those provisions but also added new ones, especially towards harmonising the norms of trade with other NSG members. The RBL Act is thus just Hyde Plus Act.

In principle, since Congress was required to waive the usual consultation period of 30 consecutive legislative days for its approval as a simple privileged resolution, amendments could also have been brought in to the RBL Bill to alter the terms of the agreement. Because of the waiving off of the consultation period, its approval was no longer possible as a privileged resolution and this allowed for amendments.

Indeed, Senators Byron Dorgan and Jeff Bingaman had together mooted an amendment, which mandated certain specific U.S. actions in the event of an Indian nuclear test. This would have led to India rejecting the agreement.

But the U.S. administration, in its bid to ensure passage of the agreement under the current regime itself, ensured that the amendment was turned down.

In a statement of Administration Policy on October 1, the Executive Office of the President said: The Administration strongly urges swift passage by the Senate of H.R. 7081 [the RBL Bill], without amendment. The Administration strongly opposes the amendment to H.R. 7081 offered by Senators Dorgan and Bingaman. The proposed amendment would inject rigid and burdensome mandates into a statutory scheme (in the AEA) already equipped to address the unanticipated circumstance of India not adhering to the nuclear testing moratorium that it affirmed to the U.S. in 2005 and reiterated to the broader international community as recently as September 5, 2008. Accordingly, the Administration considers this amendment to be unnecessary and potentially harmful to the success of U.S.-India Civil Nuclear Cooperation Initiative. Congress and the Administration have carefully addressed testing concerns in the Hyde Act, the U.S.-India 123 Agreement and the testimonies of Administration officials.

Indeed, at the hearing of the Senate Foreign Relations Committee on September 18, Under Secretary of Political Affairs William Burns and Under Secretary for Arms Control and International Security John C. Rood testified quoting Condoleezza Rices statement of April 5, 2006: We have been very clear with the Indians should India test, as it has agreed not to do the deal, from our point of view, would at that point be off.

The RBL Act (Section 101(b)) states: The agreement shall be subject to the provisions of the AEA of 1954, the Henry J. Hyde Act of 2006 and any other applicable U.S. law. Significantly, Section 102 (a) notes the following, serving a reminder as it were to the administration to adhere to the statements and clarifications it made to Congress in various hearings and documents submitted to it. Congress declares that it is the understanding of the U.S. that the provisions of the [123] Agreement have the meanings conveyed in the authoritative representations provided by the President and his representatives to Congress and its committees prior to September 20, 2008, regarding the meaning and legal effect of the Agreement.

Incidentally, the Indian government has been dismissive of these, saying that these are not reflected in the 123 Agreement, the basic document that governs the cooperation, and are hence irrelevant.

With regard to Bushs statement that fuel supply assurances in the agreement are only political commitments that are not legally binding, the following testimonies of Burns and Rood are revealing. Burns stated: As the President made clear in the transmittal letter, they are political commitments in the sense that we are determined to help India to try to ensure a reasonable steady supply of fuel and should disruptions arise, for example, [owing to] trade disputes, [when] a commercial firm fails to meet its requirements, then we are firmly determined to meet those requirements to the fullest extent consistent with U.S. law. And so any President would be bound by U.S. law and I believe that the Indians understand the clarity of our position.

Rood stated: [T]he 123 Agreement provides a legal framework. Its an enabling piece of agreement. It does not compel American firms, for instance, to sell a given product to India [I]t is not a government activity to produce nuclear fuel; its a commercial activity in the U.S. and we in the U.S. government could not legally compel American firms to provide fuel to India if they did not wish to do so.

He further clarified with regard to the Indian interpretation that the U.S. would help India procure fuel from elsewhere if the U.S. terminated its supplies: It would be inconsistent with a Presidents decision to terminate U.S. supply to then seek the supply from other countries

Section 102(b)(1) and (2) of the RBL Act reiterate the provisions in Section 103(a)(6) and (b)(10) respectively of the Hyde Act. Sub-section (1) of Section 102(b) states: In the event that nuclear transfers to India are suspended or terminated it is the policy of the United States to seek to prevent the transfer to India of nuclear equipment, materials, or technology from other participating governments in the NSG or from any other source.

Subsection (2) states: [A]ny nuclear power reactor fuel reserve provided to India for use in safeguarded civilian nuclear facilities should be commensurate with reasonable reactor operating requirements.

While there is a clear and obvious interpretation of the above sentence, the Indian government maintains that, since reasonable operating requirements has not been defined, it can be interpreted to mean lifetime fuel reserves. Clearly, the Indian government should be more realistic than to make such sweeping statements that do not make sense and defy logic.

Significantly, the RBL Act also requires the President to submit as part of the Implementation and Compliance Report as required by Section 103(g)(2) of the Hyde Act, a listing of any U.S. efforts to help India develop a strategic reserve of nuclear fuel as called for in Article 2(2)(e) of the Agreement, of any U.S. efforts to fulfil the political commitments made in Article 5(6) of the Agreement [concerning fuel supply assurance] and of any negotiations that have occurred or are ongoing under Article 6(iii) of the Agreement [concerning reprocessing of U.S. origin or U.S. obligated fuel].

As regards reprocessing rights, which come into effect only after arrangements and procedures are negotiated and approved by Congress, the RBL Act (Section 201(c)) says that the subsequent arrangements and procedures will not take effect if Congress adopts [consistent with the requirement of 130 g.(2) of the AEA and the RBL Act], and there is enacted, a joint resolution stating in substance that Congress does not favour such subsequent arrangement.

In effect, this only reiterates what has been commented upon in these columns as well as by the Left parties that there is no upfront grant of permanent right to reprocess spent fuel of U.S. origin, contrary to what the government has repeatedly sought to portray.

In addition, through this Act, Congress has sought a congruence of measures by other potential suppliers with the subsequent arrangements and procedures of the U.S. Section 201(b)(1)(C) requires the President to transmit to the appropriate congressional committees a certification that the U.S. will pursue efforts to ensure that any other nation that permits India to reprocess or otherwise alter in form or content nuclear material requires India to do so under similar arrangements and procedures.

This, essentially, would amount to other suppliers, such as France and Russia, also being forced to allow reprocessing only in a dedicated facility, besides following other procedures with regard to safeguards and environmental and physical protection of material that pass through such a facility. If the U.S. could actually enforce this on all the potential suppliers, the implication of this could be serious. That is, India cannot begin commercial negotiations with any supplier French, Russian or American before it builds a reprocessing facility and obtains reprocessing rights. Reprocessing remains central to the Indian nuclear programme, which relies on the breeder route, notwithstanding its shift towards imported nuclear power.

In this context, it would be of interest to know what India has negotiated with France in terms of reprocessing rights. For some inexplicable reason both countries have kept the agreement under wraps after Prime Minister Manmohan Singh and French President Nicolas Sarkozy signed it in Paris on September 30.

According to one news report, France has agreed to have Indian spent fuel shipped back to France for reprocessing, as in the case of Japan. Besides problems of logistics, the shipping cost would increase significantly the operating costs and hence the tariff on electricity generated.

Through a specific policy directive to the administration, the RBL Act seeks to restrict the transfer of Enrichment and Reprocessing (ENR) technologies. It has been Indias hope that even if U.S. policy did not allow such transfer, it could procure these from sources such as Russia and France. Section 204(a) states that before entry into force the President shall certify to the appropriate congressional committees that it is the policy of the U.S. to work with the members of the NSG, individually and collectively, to agree to further restrict transfers of equipment and technology related to the enrichment of uranium and reprocessing of spent nuclear fuel (emphasis added).

Indeed, Rice had made a personal commitment to House Representative Howard Berman in September that at the November meeting of the NSG the U.S. would give the highest priority to reaching a decision to seek limits on the export of ENR technologies to countries that were not signatories to the NPT. Neither the NSG Guidelines per se nor the India-specific waiver restricts such transfers except for requiring that exporters exercise prudence. However, such a certification, as required by the Act, is yet to be made. Therefore, even though the agreement has been signed by the two countries, it is yet to take effect.

In addition, the Act (Section 104(1) and (2)) also requires that the U.S. can issue licences for nuclear transfers pursuant to this agreement only after the India-specific Safeguards Agreement concluded between India and the International Atomic Energy Agency (IAEA) on July 7 has entered into force and India has filed a declaration of facilities to be brought under safeguards that is not inconsistent with Indias civil-military Separation Plan of May 11, 2006 (taking into account the later initiation of safeguards than was anticipated).

Section 204(c) further requires the President to submit not later than six months of the enactment of the RBL Act, and every six months thereafter, a report on the efforts by the U.S. towards this policy on ENR technologies. It is not clear if these have happened.

Clearly, Indias perceptions of what its rights and obligations are under the 123 Agreement belong in the realm of imagination or deliberate posturing to ward off severe criticism at home. But congressional testimonies, the U.S. Acts as well as documents have repeatedly proved them wrong. Even if one went strictly by the premise that the 123 Agreement alone is the legal document that India will abide by and that alone will govern the nuclear trade and cooperation, Article 2(1) of the agreement states clearly that each party will implement the agreement in accordance with its respective applicable treaties, national laws, regulations and licence requirements.

Therefore, it is simply illogical to maintain ad nauseum that the provisions of internal laws of the U.S. are of no concern to India and what matters is the text of the 123 Agreement. It is that very text which implies that all the restrictive provisions of the AEA, the Hyde Act, the RBL Act and any other applicable U.S. law will have a bearing on Indias nuclear trade with the U.S., and probably with others as well via the Hyde and RBL Acts. Not acknowledging this would be akin to keeping an ostrich-like posture.

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