A guide to the provisions of the 123 agreement

The text of the Indo-U.S. nuclear cooperation agreement – also known as the 123 agreement – was released on Friday. How does the text measure up to the assurances Prime Minister Manmohan Singh provided to Parliament?

4 August 2007
The Hindu

A guide to the provisions of the 123 agreement

Siddharth Varadarajan

The text of the India-U.S. nuclear cooperation agreement — 22 pages and 17 Articles long — was “frozen” in Washington on July 22 but made public finally on Friday. A preliminary reading of the agreement suggests a serious effort was made by both India and the U.S. to square a very difficult circle. Both sides made and received concessions and the consensus within Government of India — including the Department of Atomic Energy — is that t his is a deal the country can live with provided it does not become the template for the Nuclear Suppliers Group when it considers changing its guidelines to allow nuclear commerce with India. In particular, Indian officials hope the NSG will not prohibit the sale of fuel cycle technology and components, or adopt a rule terminating cooperation in the event of an Indian nuclear test. While those are issues of the future, it is important to understand the extent to which the 123 agreement has addressed India’s concerns.

Under what circumstances can the U.S. terminate cooperation?

The agreement will remain in force for 40 years but Article 14.1 gives the U.S. the right to terminate the agreement “on one year’s written notice.” It should also provide the reasons for seeking this termination. 14.3 also allows for termination in the event of a violation of the agreement by India. If termination is based on violation of an IAEA safeguards agreement, a “crucial factor” will be whether the IAEA Board of Governors has made a finding of non-compliance

Isn’t termination after one year’s notice too open-ended?

It is. The standard 123 with a non-nuclear weapon state (NNWS) provides for termination in the event that the NNWS conducts a nuclear test or violates the terms of the agreement, such as the peaceful use clause, or safeguards. However, India felt a reference to a nuclear test as the trigger for termination of cooperation would amount to converting its unilateral, voluntary moratorium on nuclear testing into an obligation with legal consequences.

What happens once the U.S. serves notice?

Article 14.2 says that before the agreement is terminated, the U.S. and India “shall co.sider the relevant circumstances and hold consultations based on the recognition that both are States with advanced nuclear technology, which have agreed to assume the same responsibilities and practices and acquire the same benefits and advantages as other leading countries with advanced technology.” The consultations may be carried out by a Joint Committee specifically established for this purpose. There is no time frame for these consultations but they cannot be open-ended: one year after notice is served, the agreement stands terminated.

Why the reference to “States with advanced nuclear technology”?

India considers this phrase — first used in the July 2005 Indo-U.S. statement — to be a euphemism for nuclear weapons states. The U.S. is unwilling to say so. But Article 14.2 adds that the U.S. agrees “to consider carefully the circumstances that may lead to termination or cessation of cooperation.” This is a euphemism for an Indian nuclear detonation.

So what happens if India were to conduct a nuclear test?

Article 14.2 says the U.S. agrees to “take into account whether the circumstances that may lead to termination or cessation resulted from [India’s] serious concern about a changed security environment or as a response to similar actions by other States which could impact national security.”

Though there is nothing in this language to oblige the U.S. to take a benign view of an Indian test which follows a test by another country, an attempt has been made to differentiate an ‘unprovoked’ Indian test from a test conducted in response to a detonation by others, presumably China or Pakistan. Obviously, the resumption of nuclear testing by Washington — America is considered the one nuclear weapon state most likely to test in the next decade — may not be treated by the U.S. administration as an acceptable excuse for an Indian test.

Does the 123 agreement give the U.S. the right of return?

Article 14.4 unambiguously grants the U.S. “the right to require the return … of any nuclear material, equipment, non-nuclear material or components transferred under this agreement and any special fissionable material produced through their use” following the cessation of cooperation. This includes nuclear fuel as well as any plutonium that is produced from the reprocessing of U.S.-origin spent fuel.

When can this right be invoked?

The same article says the U.S. can serve notice invoking this right and listing the items whose return is being sought at any time before the date on which the agreement terminates. In other words, the U.S. can serve a right of return notice at the same time notice to terminate cooperation is issued.

What protections has India built into the agreement?

Article 14.5 says that India and the U.S. “recognize that exercising the right of return would have profound implications for their relations.” Prior to the removal of any items under the exercise of this right, therefore, the agreement provides for several layers of insulation. First, the U.S. is obliged to “undertake consultations” with India. These consultations are envisaged to be separate from the Article 14.2 consultations on termination. Secondly, “such consultations shall give special consideration to the importance of uninterrupted operation of nuclear reactors” in India. Thirdly, 14.6 says “fair market value” compensation must be agreed upon and paid to India prior to the removal of any items and an agreement must be reached with Delhi “on methods and arrangements” for the return.

Fourthly, 14.7 says prior to any return, India “shall satisfy [itself] that full safety, radiological and physical protection measures have been ensured in accordance with [its] existing national regulations.” Fifthly, bearing in mind the importance of uninterrupted operation of nuclear reactors, 14.8 stresses that “the consultations between the parties shall address mutual commitments” on continuity of fuel supplies contained in Article 5.6 of the agreement. This Article incorporates the fuel supply assurances spelt out in the March 2 Indo-U.S. agreement on the separation of Indian nuclear facilities. The same clause adds: “It is not the purpose of the provisions of this Article regarding cessation of cooperation and right of return to derogate from the rights of [India]” under Article 5.6. Sixthly, and finally, India retains the right, under Article 5.6(c) to take “corrective measures” on the safeguards front if there is disruption of fuel supplies pursuant to any U.S. action.

How different is the right of return clause from the other 123 agreements the U.S. has signed?

Japan’s 123 agreement provides for compensation and says that before the U.S. terminates cooperation or requires the return of its exported nuclear items, “the parties shall consult for the purpose of taking corrective steps and shall carefully consider the economic effects of such actions, taking into account the need to make such other appropriate arrangements as may be required.” This is the standard template the U.S. uses with non-nuclear weapon states. China’s 123 agreement has no right of return clause since the U.S. Atomic Energy Act only requires this of NNWS.

What does India’s 123 agreement say about reprocessing?

Under Article 6(iii), the U.S. grants India “consent to reprocess … nuclear material transferred pursuant to this agreement.” Though the MEA fact-sheet issued last week had used the word “prior consent,” the word “prior” does not figure in the agreement. The reason is that this Article clearly states: “To bring these rights into effect, India will establish a new national reprocessing facility dedicated to reprocessing safeguarded nuclear material under IAEA safeguards and the Parties will agree on arrangements and procedures under which such reprocessing … will take place in this new facility.” There is also an explicit timeline: “Consultations on arrangements and procedures will begin within six months of a request [by India] and will be concluded within one year.”

What will these “arrangements and procedures” involve?

Apart from the application of IAEA safeguards, the Article says the arrangements and procedures will include provisions relating to the IAEA’s physical protection, storage, and environmental protection standards “and such other provisions as may be agreed by the Parties.” This last open-ended reference represents a potential source of uncertainty and delay, especially if the U.S. insists on India agreeing to terms and conditions which go beyond what the IAEA requires. Article 14(9) also allows for the suspension of these arrangements by the U.S. “in exceptional circumstances.”

How does the language on reprocessing differ from other 123 agreements?

China’s 123 commits the U.S. to “promptly hold consultations to agree on a mutually acceptable arrangement,” to view any Chinese request for reprocessing rights “favourably” and “seek agreement within six months on long-term arrangements.” There is provision for an interim arrangement to be reached within six months and China undertakes not to act within that period of time. In other 123 agreements, the standard language is that material transferred “shall not be reprocessed unless the [U.S.] agrees.”

What does the 123 agreement say about the possibility of U.S. inspections of Indian nuclear facilities?

Article 10.4 says: “If the IAEA decides that the application of IAEA safeguards is no longer possible, the supplier and recipient should consult and agree on appropriate verification measures.”

How different is this from the standard 123?

The language usually used — for example in the Japan 123 — is that if either party “becomes aware that for any reason the Agency is not or will not be applying safeguards” they “shall immediately enter into arrangements which conform to safeguards principles and procedures of the Agency and provide effectiveness and coverage equivalent to that intended to be provided by [IAEA] safeguards.” In India’s case, the crucial determination has been left to the IAEA and not the U.S. Also, no timeliness adjective has been specified.

So there will be no question of U.S. inspectors roaming around Indian nuclear facilities?

There is an unusual clause in the agreement — 12(3) — which speaks of India facilitating the entry of experts “when execution of an agreement or contract pursuant to this agreement” requires this. This clause does not figure in the 123 agreements the U.S. has signed with other NNWS such as Japan or Morocco and is perhaps intended to smooth the way for U.S. end-use verification efforts, should they ever become necessary following an IAEA determination on the non-application of safeguards.

What about “full cooperation”?

The agreement does not allow India to access reprocessing, enrichment or heavy water technologies or components, or dual-use components for use in reprocessing, enrichment or heavy water facilities. Article 5.2 only says an amendment to the agreement is needed to allow such transfers.

Any other loose ends?

Article 17 calls for the establishment of an “Administrative Arrangement” in order to provide for the effective implementation of the provisions of the agreement. Given that the nature of this arrangement will govern the consultations both parties must have in the event of termination or right of return, the Indian side is likely to be keen to finalise this aspect as well.