Russia says no to supplier liability

Even as political acrimony over the Nuclear Liability Bill rages in and outside Parliament, India's old-time friend Russia has clearly told the Indian establishment that it will not accept any liability for the supply of equipment and other material to help India build its nuclear power plants, either in the present or future.

Left parties have argued over the past week that the Manmohan Singh-led government has exempted foreign suppliers from liability should a nuclear accident occur in India, in which their materials are involved, because the PM "wants to help" private US companies enter the Indian market.

But as the Bharatiya Janata Party joined the Left in seeking to amend the bill and embarrass the government, Russian government sources confirmed to Business Standard that Moscow had clearly refused to accept any liability for the two civil nuclear reactors that it is currently building in Kudankulam, Tamil Nadu.

As the world watches India debate its nuclear Bill, US diplomats said they were concerned that private US companies would be at a "huge risk disadvantage" if they had to compete with foreign supplier liability incorporated, compared to government-owned firms such as Russia's Atomstroiexport.

But with the Russians now joining the US on this matter, India could be tying itself to a situation that it had not foreseen -- or intended.

Russian sources pointed out that the Kudankulam agreement -- signed in 1989 between the erstwhile Rajiv Gandhi government and former president of the then Soviet Union, Mikhail Gorbachev -- contained a clause in which supplier liability ended with delivery of the nuclear reactor and other equipment to Indian operator NPCIL.

Even when both countries agreed to grandfather the 1989 Gandhi-Gorbachev agreement in the face of worldwide opposition soon after the break-up of the Soviet Union in 1996, a new supplementary contract did not accept any supplier liability, the Russian sources said.

In fact, the ongoing debate over the Nuclear Liability Bill has so distressed potential foreign suppliers that many are privately debating whether it was worth helping India gatecrash the exclusive club of de facto nuclear powers, even though it has consistently refused to sign the Nuclear Non-Proliferation Treaty.

As they watch the Indian political class debate the Bill, Russian and American diplomatic sources said they were united in their opposition to foreign supplier liability in their contracts with India. US diplomatic sources, speaking on condition of anonymity, said it would be a "disaster" for US companies if the Indian Bill insisted on large foreign supplier liability.

The Russian government source also said that like the US and France, Russia would have to "take another look" at its contract with India if the Bill incorporated foreign supplier liability. "Russia is united with the US and France on this score… India is creating an international precedent… nobody will accept this," the Russian government source said.

He pointed out that India and Russia were, in fact, currently discussing the technical contract for two more nuclear plants, also to be set up at Kudankulam -- for which an agreement was signed when Russian president Dmitry Medvedev came to Delhi two years ago -- but if India insisted on incorporating supplier liability in the Bill, Russia could find it difficult to proceed with the agreement.

"The Indian bill under discussion in the Indian parliament may become an obstacle in the fulfilment of the Kudankulam contract with Russia," the Russian source said.

Medvedev is coming to India for his annual summit meeting with Prime Minister Manmohan Singh on December 21, and it is possible that he will attend a ceremony to mark the installation of Russian fuel rods into the Kudankulam reactors.

As they go onstream in December, the Kudankulam reactors will mark an epochal event in the Indo-Russian relationship, which has been witness to the tumult and turbulence of the last two decades.

After the break-up of the Soviet Union in 1991, the Russian government not only evaded international scrutiny to help India's IAEA-safeguarded Tarapur reactor with nuclear fuel, it also continued to sidestep Western sanctions by pursuing its nuclear relationship with India.

So, when the Bush administration decided to push India's case at the Nuclear Suppliers' Group, Russia took full advantage and even before the ink had dried, signed contracts with India to set up two more civil nuclear power plants in Kudankulam.

Soon, Russia was allotted the Haripur site in West Bengal to set up another two nuclear plants. Besides Russia, India allotted sites in Gujarat and Andhra Pradesh for US reactors and at Jaitapur in Maharashtra for the French government-owned reactor Areva.

None of the 28 countries which have nuclear liability laws insist on foreign supplier liability, the Russian sources said.

As for the US, the Nuclear Liability Bill was supposed to be the last bit of legislation before US President Barack Obama came to Delhi on a triumphal visit in November.

Although the Republicans had taken the credit for making India a de facto nuclear power through the 123 Agreement, the Democrats seem happy to pursue the course.

But with the BJP and the Left painting the Manmohan Singh-led attempts to pass the Bill as a "US-inspired campaign," a US diplomatic source pointed out that if the Bill did pass in this manner, the "cost-benefit ratio for US private companies to come into the Indian market would be so poor" that these companies would have to take a good, hard look at how they want to participate in the changed rules of the game.