Deal with US raises troubling questions

As illustrated by the Senate vote late Wednesday, the United States pursued the civilian nuclear deal with India through a strong bipartisan consensus at home. By contrast, the Indian Parliament has not only been sidelined  -- with the government skipping the traditional monsoon session  -- but also the deal is being thrust on India in a blatantly partisan manner, making it a highly divisive issue. 

With the Senate vote, the US Congressional ratification process is over, but the deal cannot be brought into force until the US President fulfills requirements specified in the ratification legislation, the United States-India Nuclear Cooperation Approval and Nonproliferation Enhancement Act.

Before exchanging diplomatic notes to bring the deal into effect, the US President has to certify to the US Congress that "it is the policy of the United States to work with members of the Nuclear Suppliers Group, individually and collectively, to agree to further restrict the transfers of equipment and technology related to the enrichment of uranium and reprocessing of spent nuclear fuel" [Section 204a].

Contrast this with Prime Minister Manmohan Singh's solemn assurance to Parliament about the "removal of restrictions on all aspects of cooperation and technology transfers pertaining to civil nuclear energy, ranging from nuclear fuel, nuclear reactors, to reprocessing spent fuel."

Lest there be any ambiguity regarding this benchmark, he added: "We will not agree to any dilution that would prevent us from securing the benefits of full civil nuclear cooperation as amplified above."

He had said: "The central imperative in our discussions with the United States on civil nuclear cooperation is to ensure the complete and irreversible removal of existing restrictions imposed on India through iniquitous restrictive trading regimes over the years."

In fact, the Prime Minister had even pledged in Parliament: "Before voluntarily placing our civilian facilities under IAEA [International Atomic Energy Agency] safeguards, we will ensure all restrictions on India have been lifted."

That pledge he is set to break.

The United States has come full circle: Having initiated a penal approach against India following the 1974 test, the US  has now created a special exemption for India from the very rules Washington helped fashion to punish India.

For India, the proffered deal raises troubling questions. It does not come with basic elements that any recipient State would want.

1. India has no assured fuel-supply guarantee. The United States-India Nuclear Cooperation Approval and Nonproliferation Enhancement Act reaffirms that the fuel-supply assurances in the 123 Agreement are "political commitments," not legal assurances, as the US President himself has attested.

Moreover, Section 102(b)(2) of this Act mandates that "any nuclear power reactor fuel reserve provided to the Government of India for use in safeguarded civilian nuclear facilities should be commensurate with reasonable reactor operating requirements."

It also states that "in the event that nuclear transfers to India are suspended or terminated pursuant to title I of such Act, the Atomic Energy Act of 1954, or any other United States law, 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 Nuclear Suppliers Group (NSG) or from any other source" [Section 102(b)(1)].

So, if the US terminates cooperation with India, it will seek to ensure that New Delhi cannot secure supplies from "any other source."

2. India has been granted no upfront reprocessing right, with the US Congress empowering itself to carefully scrutinize any subsequent reprocessing-related arrangements with New Delhi. The title of Section 201 of the Act is self-explanatory: "Procedures Regarding A Subsequent Arrangement on Reprocessing."

Not only has the US Congress asserted its right to reject any subsequent arrangements to grant India the right to reprocess spent fuel [Section 201(c)], but also demanded from the President "a certification that the United States will pursue efforts to ensure that any other nation that permits India to reprocess or otherwise alter in form or content nuclear material that the nation has transferred to India or nuclear material and by-product material used in or produced through the use of nuclear material, non-nuclear material, or equipment that it has transferred to India requires India to do so under similar arrangements and procedures" [Section 201(b)(1)(c)]. 

3. India has inexplicably agreed to negotiate a separate Section 131 agreement on reprocessing later  -- an accord that will need to pass Congressional muster -- although Washington granted Japan and EURATOM the actual right to reprocess upfront in a 123 Agreement. For example, the 1987 Japan-US 123 accord was accompanied by a nine-page "implementing agreement" that gave effect to "advance, long-term consent for reprocessing, transfers, alteration and storage of nuclear material" by spelling out the reprocessing-related arrangements.

In fact, New Delhi has gratuitously agreed to route all "foreign nuclear material" through a new reprocessing facility. Now, the US Congress is seeking to ensure that other supplier-States like France and Russia do not grant India a reprocessing right on terms less stringent than the US.

4. The ratification legislation strips the sanctity of the bilateral 123 Agreement by making it completely subservient to US law. As the Act puts it: "Nothing in the Agreement shall be construed to supersede the legal requirements of the Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006 or the Atomic Energy Act of 1954" [Section 102(d)].

In all fairness, it must be admitted that the United States for decades has held the position that a 123 Agreement with any State is neither a treaty nor has force under the Vienna Convention on the Law of Treaties, which the US hasn't even ratified. After all, a 123 Agreement is a requirement not under international law but under US law.

In any event, the 123 Agreement India has negotiated with the US grants Washington an unfettered right to suspend all supplies forthwith. The 123 Agreement only demands the serving of a one-year termination notice on any ground, however extraneous. Suspension of supplies can follow immediately.

For the US, such an unconstrained right was vital to tether New Delhi to the eclectic non-proliferation conditions the deal imposes.

The deal on offer creates a Tarapur-style trap of gigantic dimensions. In fact, the latest Act specifically empowers the US  to do what it did in 1978  -- retroactively rewrite the rules of cooperation with India by enacting a new domestic law.

Section 101(b) affirms that the agreement with India shall be subject not only to the Hyde Act and the Atomic Energy Act but also to "any other applicable United States law."

The notion that India can build energy "security" through imports of high-priced, foreign fuel-dependent reactors is an absurdity. Moreover, just as cheap oil now appears fanciful, cheap nuclear power for long has been a mirage.

More than half a century after then US Atomic Energy Agency Chairman Lewis Strauss claimed that nuclear energy would become "too cheap to meter," the nuclear power industry everywhere subsists on generous State subsidies. The current electricity-market liberalization trends spell trouble for the global nuclear-power industry because they threaten the State support on which it survives. As a 2005 International Atomic Energy Agency study by Ferenc Toth and Hans-Holger Rogner warns, "nuclear power's market share might indeed follow a downward trajectory" if State subsidies abate and more cost-effective reactors are not designed.

Nuclear power reactors also remain very capital-intensive, with high up-front capital costs, long lead times for construction and commissioning, and drawn-out amortization periods that discourage private investors.

Three factors are likely to discourage private investment in Indian nuclear power. The first is the deal's messy terms. The second is the political uncertainty in India, where national elections are approaching. The commercial deals will take long to finalize, but several parties have vowed to review or renegotiate the deal if voted to power.

Yet another factor is the continuing disarray that marks the Indian electricity market and energy policy.

The nuclear-power industry in India is State-run and subsists on generous government subsidies. But even the subsidized price of nuclear electricity is higher than the cost from most other energy sources.

It is not clear to what extent the next Indian government will be able to guarantee similar subsidies or provide full accident-liability and regulatory-delay cover to encourage private investment at a time when the country is trying to promote electricity-market liberalization.

In fact, to allow private players in the nuclear-power industry, India will have to amend its Atomic Energy Act in a process that would subject the deal finally to some parliamentary scrutiny, even if belatedly.

Brahma Chellaney, professor of strategic studies, Centre for Policy Research, New Delhi, is the author, among other books, of Nuclear Proliferation: The US-India Conflict.