No place to hide as nuclear deal enters last lap

The `123 agreement' is important not in order to facilitate nuclear imports from the U.S. but because it will form the template for changes to the Nuclear Suppliers Group guidelines. In the final lap, India cannot afford to abandon its core concerns.








24 March 2007
The Hindu

No place to hide as nuclear deal enters last lap

Siddharth Varadarajan

AS INDIA enters the next — and perhaps final — round of talks with the United States over the conditions under which bilateral nuclear trade will take place, its negotiators face a peculiar challenge.

The enabling legislation passed by Congress last December — the Hyde Act — tagged on so many onerous conditions as to render any voluntary purchase by India of U.S. nuclear equipment or fuel extremely unlikely. Yet, even if it has no desire to buy American, India cannot afford to take the negotiations over bilateral nuclear cooperation lightly because Washington will try and replicate at the international level tomorrow all the exclusions and restrictions it manages to impose on New Delhi today. Though the strategic benefit from pushing the nuclear deal with India is payoff enough for the U.S., the Bush administration will not allow American vendors to lose out to Russian and French companies in the multi-billion dollar orders that India is expected to generate once it is opened up to nuclear trade.

The precise contours of the bilateral cooperation agreement — called the `123 agreement' after Section 123 of the U.S. Atomic Energy Act — are important because the U.S. is still trying to withhold "full" civilian nuclear cooperation from India on three major fronts. The Hyde Act excludes the sale of equipment related to enrichment, reprocessing, and heavy water production to India, and the White House also insists India will not be given prior consent to reprocess spent fuel produced from American-origin equipment or low-enriched uranium (LEU). Thirdly, the U.S. side does not want India to be able to stockpile nuclear fuel.

In addition, the U.S. wants to use the 123 agreement to convert India's non-binding unilateral voluntary moratorium on nuclear testing into a permanent, binding condition for the international nuclear supplies spigot staying open.

Though the Obama amendment to the Hyde Act restricts the fuel guarantees the U.S. can give India in exchange for placing its civilian reactors under safeguards in perpetuity, it has always been the administration's practice to limit fuel supplies to reactor operating requirements. For example, Article IV of the U.S.-Turkey 123 agreement signed in 2000 and ratified by the Turkish parliament last year declares that the amount of U.S. fuel provided "shall not at any time be in excess of that quantity that the parties agree is necessary for ... the efficient and continuous operation of reactors." Not surprisingly, this is the language Washinton is offering India.

On the spent fuel issue too, Undersecretary of State Nicholas Burns was crystal clear in an interview to CNN on December 8, 2006. Asked whether the U.S. would allow India to reprocess spent fuel in the manner in which the 123 agreements with Japan, Euratom, and Switzerland allow reprocessing of spent fuel, Mr. Burns said: "The great majority of countries do not [have U.S. permission]. It requires a very intricately negotiated and lengthy agreement with the United States, and India does not have one yet. And, so, it is theoretically possible for the future, but currently India will be treated as all other countries are treated." In other words, no.

Switzerland is an interesting case because its earlier 123 agreement signed in 1965 — which provided for only case-by-case approval — led to considerable delays in reprocessing. In India's case, the `delay' in U.S. approval for reprocessing the spent fuel at Tarapur has stretched to over 40 years! In 1997, the U.S. gave Berne advance, long-term consent to transfer spent fuel to France and Britain for reprocessing and conversion to mixed oxide fuel (MOX) and for the return to Switzerland of MOX pellets.

The 1985 U.S-China agreement also deviates from the default "case by case" setting. Despite noting that China has "no intention" of reprocessing U.S.-origin or U.S.-obligated spent fuel, the agreement does not prohibit reprocessing and actually stipulates that the two countries will "promptly hold consultations to agree on a mutually acceptable arrangement" if China should seek to alter U.S.-origin material. Moreover, it commits the U.S. to "consider such activities favourably" and even provides for "interim" reprocessing by China pending a long-term arrangement.

Unlike China, India is stating up front that it has every intention of reprocessing; and yet the U.S. is unwilling to grant long-term consent.

From 123 to NSG

As of now, potential nuclear partners like Russia are not insisting on any restrictive conditions, provided the 45-nation Nuclear Suppliers Group amends its basic guidelines to allow sales to India. The Russian contract for the construction of two 1000 MWe VVER reactors at Koodankulam contains no extraneous clauses. India has the right to reprocess the spent fuel produced. Russia has provided a sovereign guarantee for LEU supplies over the reactors' lifetime and there is no termination clause in the event of an Indian nuclear test. Similarly, the `Protocol of Intent' (PoI) for four additional Russian reactors signed during the visit to Delhi of President Vladimir Putin in January includes none of the restrictions the U.S. would like to impose on India. Why the Indian side turned down the Russian offer of a firm Inter-Governmental Agreement (IGA) on the four reactors -- as reported by Bharat Bhushan in The Telegraph on January 24 -- and opted instead for a watered down PoI is perplexing, given that an IGA could have set a positive benchmark for the 123 agreement with the U.S.

Apart from the 123 agreement, there are other hurdles to cross, such as the American template for the "India-specific" safeguards to be worked out with the International Atomic Energy Agency. Finally, the U.S. is also insisting the separation of Indian civilian and military nuclear "programs" must prohibit the "routine" or "frequent" rotation of personnel between the two sides as well. India denies it is under any obligation to firewall personnel but the pressure will mount when it is time for the U.S. President to make a "determination" on India's fulfilment of obligations specified by the Hyde Act.

Though New Delhi officially welcomed the passage of the Hyde Act, senior officials now privately concede its text has all but killed any prospect of India making major nuclear purchases from American firms. The only solace is that once the NSG changes its rules, India will be free to buy from other suppliers, a senior official told this writer. The official went on to say it was better to settle for a "passing grade like 60 or 70 per cent" in the 123 talks in order to be able to pass the NSG test. Other officials disagree, arguing that settling for anything less than what Prime Minister Manmohan Singh has himself outlined would cost India dearly once the NSG starts considering its rule change.

In July 2005, the U.S. agreed to work with its allies to "adjust international regimes to enable full civil nuclear energy cooperation and trade with India." But the Bush administration has sequenced the entire process so as to ensure the "adjustment" that emerges at the NSG closely mirrors its own domestic restrictions. That is why Washington has made only perfunctory efforts so far, despite the passage of the Hyde Act, to canvass support at the NSG. With the Bush administration arguing that the 123 agreement must be fully negotiated first, the Indian issue will most likely not figure in the nuclear cartel's 2007 plenary meeting opening in Cape Town on April 16.

Whether India likes it or not, the 123 agreement has become the only instrument with which the NSG's restrictions can be prised open, at least for the moment. And precisely for that reason, it cannot accept a bilateral agreement with the U.S. that places extraneous and arbitrary restrictions.

In the run-up to the Hyde Act, the Bush administration played the executive-legislature division in Washington to the hilt in order to shift the goalposts of the July 2005 agreement. Today, U.S. officials are pressing India to conclude the 123 negotiations quickly citing domestic political uncertainties caused by the ascendancy of the Democrats. As the U.S. slips into presidential election mode, it is said Congress' appetite to give President Bush a foreign policy boost by approving the 123 agreement will diminish. While this is true, the nuclear deal with India is so significant for the U.S. in strategic terms that partisan politics will not be allowed to scuttle it.

If the Bush administration is so worried about timing, it should ensure NSG approval first. In any case, the way the Hyde Act is worded, the NSG must change its rule for India before the 123 agreement can be submitted for congressional approval. By seeking to introduce an artificial deadline, the U.S. hopes to browbeat India into abandoning its concerns. But the Manmohan Singh government cannot afford to do that. Even without the subsequent shift in goalposts, the nuclear deal was politically contentious. If there is no "full" cooperation at the end of the negotiating tunnel and if the U.S. succeeds in converting India's voluntary test moratorium into an involuntary one — that too at a time when its Deputy Secretary for Energy, Clay Sell, reiterated only last week America's "right" to conduct nuclear tests in the future — the political fallout will be substantial.