BRENDAN SMIALOWSKI/REUTERS

In Washington on July 18, 2005, when Prime Minister Manmohan Singh and President George W. Bush made the joint statement on India-U.S. cooperation in nuclear, space and other issues.

NEARLY two years after Prime Minister Manmohan Singh and President George W. Bush issued the Joint Statement on July 18, 2005 that set the stage for facilitating civil nuclear cooperation and commerce between India and the United States, the agreement formalising the stated intent was concluded on July 20 and unveiled on August 1.

The finalisation of the text of the agreement, known as the ‘123 Agreement’ after Section 123 of the U.S. Atomic Energy Act (AEA) which governs international nuclear cooperation by the U.S., took place in Washington during July 17-20. This was the fifth round of negotiations after the process began in June 2006, which was extended beyond the originally scheduled three days. According to reports, the talks, which had in fact been declared closed with “substantial progress made on the outstanding issues”, were resumed after Dick Cheney, U.S. Vice-President, met National Security Adviser M.K. Narayanan and pronounced that the deal be somehow concluded and U.S. Secretary of State Condoleeza Rice directly intervened to make it happen.

“The commitments expressed in the Joint Statements of July 18, 2005 and March 2, 2006 have been fully reflected in the final text,” stated Narayanan, who led the Indian delegation at the press briefing on July 27. Likewise, the fact sheet issued by the Indian government claimed that the text met the concerns of both sides and fulfilled all the assurances made by the Prime Minister on August 17, 2006.

In what follows, we discuss whether this is indeed true of the negotiated Agreement. The outstanding issues – from the standpoint of Prime Minister’s assurances – that remained to be resolved during the negotiations were the following: (a) “full civil nuclear cooperation”, where “full” in the Indian government’s interpretation implied “all aspects of the nuclear fuel cycle” (emphasis added); (b) the Indian right to reprocess (under safeguards) the spent fuel resulting from nuclear material of U.S. origin; (c) “fall-back safeguards” involving bilateral arrangements if safeguards implementation by the International Atomic Energy Agency (IAEA) are seen to be inadequate; (d) maintenance of India’s unilateral moratorium on nuclear testing being made binding by linking it to the 123 Agreement through its termination following a test; (e) the U.S. right of return of material and equipment supplied under the agreement following an Indian nuclear test and the consequent cessation of cooperation; and, (f) assurance of continued fuel supply (for the lifetime of safeguarded reactors) given by Bush on March 2, 2006, following the Indian civil-military separation plan and placing civilian nuclear facilities under safeguards in perpetuity in the event of termination of the agreement for reasons including an Indian nuclear test.

To claim that all the assurances of the Prime Minister and all the above concerns have been fully met in the final 123 Agreement is misleading because if India had not yielded from its original position on these contentious issues (see Frontline, June 29), there would have been no agreement. However, it must be admitted that the negotiators did a commendable job in drafting the agreement in a language that makes it more acceptable and domestically saleable (in both countries) than what it was in its original form. Indeed, the language used and its implications are quite unlike any of the earlier 123 Agreements that the U.S. has signed with other countries.

It must, however, be realised that if India wants such a deal, notwithstanding the conditions under which the agreement can be effected, this may be the best that one can hope to get given the constraints of U.S. domestic laws that the agreement, as its preamble spells out clearly, has to conform to. Also, it is better to have the best possible, but imperfect, agreement – if we want to engage in international nuclear trade – on which basis the Nuclear Suppliers Group (NSG) can make India-specific amendments to its export guidelines than to wait for the perfect agreement which may never happen. The question whether we do need the deal is indeed moot but that will not be addressed here.

The real substantive gains from India’s point of view are the consent to reprocess spent fuel in principle and the substantial room for negotiations and time buffer built into the Agreement before its possible termination even following a nuclear test. The former became possible after India recently offered to place a dedicated reprocessing facility for reprocessing safeguarded spent fuel under safeguards in perpetuity (see Frontline, June 29). Even here there are ambiguities that perhaps need to be clarified through bilateral discussions. The resolutions as regards the other issues are either partial or only apparent because of the careful wording of the relevant clauses in the 123 text.

Consider (a) above. The preamble to the 123 Agreement itself denies “full civilian nuclear cooperation”, as interpreted by India. The phrase is elaborated to mean, “covering aspects of the associated nuclear fuel cycle”, with the word all in (a) above dropped. This is reiterated under Article 2 on Scope of Cooperation (Clause 2.2d). According to reliable sources this has the implication that reprocessing and enrichment technology or equipment will not be transferred. Significantly, however, according to Clause 2.2(e), the scope will include the “development of a strategic reserve” of nuclear fuel to guard against any disruption of supply over the lifetime of India’s reactors, which is of relevance to issue (f) above.

To reiterate that the agreement will have no bearing on the strategic or unsafeguarded or military nuclear activities of either party, Clause 2.4 says: “[N]othing in this Agreement shall be interpreted as affecting the rights of the Parties to use for their own purposes nuclear material, non-nuclear material, equipment, components, information or technology produced, acquired or developed by them independent of any nuclear material… transferred to them pursuant to this Agreement. The Agreement shall be implemented in a manner so as not to hinder or otherwise interfere with any other activities involving the use of nuclear material… and military nuclear facilities produced, acquired or developed by them independent of this Agreement for their own purposes.”

The Prime Minister had also stated in Parliament: “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.” India being a non-nuclear weapon state (NNWS) as per U.S. law, which follows from the Nuclear Non-Proliferation Treaty (NPT), such an expectation is highly unrealistic. In particular, export of nuclear ‘Trigger List’ items, which are directly used in nuclear fuel cycle activities, requires full-scope safeguards (FSS) both under U.S. law and under Guidelines I of the NSG. However, Article 4.2 of the 123 Agreement ensures that appropriate export licences are issued for “sound and efficient administration of this Agreement” by the U.S. Nuclear Regulatory Commission (NRC), the licensing authority for such items.

Of course, such trade with the U.S. can commence only if the NSG too makes its India-specific amendments to the Guidelines to facilitate such transfers to India, which will also enable trade in such items with other countries. However, Article 5.2 spells out restrictions as regards transfer of technology and equipment relating to reprocessing, enrichment and heavy water production, normally referred to in U.S. regulations as sensitive nuclear technologies (SNTs). Interestingly, however, in the present 123 Agreement, heavy water technology and equipment have been separated and SNT refers only to reprocessing and enrichment technologies. This, according to informed sources, was to facilitate the possibility of accessing equipment and critical components for heavy water production in which India’s pre-eminence is well demonstrated, if not for reprocessing. But, in any case, any envisaged transfer of SNTs and heavy water technology and equipment cannot be automatic, and according to Article 5.2, “may be transferred only pursuant to an amendment to this Agreement”. This implies a Congressional approval and, therefore, a hurdle. If the amendments to NSG Guidelines too strictly follow the provisions of the 123 Agreement, these too may not facilitate transfers of these from elsewhere, in particular for the proposed dedicated reprocessing facility.

One of the issues raised by the Left parties in their statement on August 7 pertains to the restrictions on nuclear-related dual-use items as well. Transfer of nuclear dual-use items globally are controlled by Guidelines II of the NSG. In the U.S., the Department of Commerce (DOC) controls their exports. While these were, in principle, exportable to nuclear facilities under islanded safeguards (as against FSS), Indian entities have faced severe restrictions in importing these not only from the U.S., owing to its “catch-all” licensing policy, but from elsewhere too because of domestic individual export control policies. “Transfers of dual-use items that could be used in enrichment, reprocessing or heavy water production facilities will be subject to the Parties’ respective applicable laws, regulations and licence policies,” says Article 5.2.

Here is an area that would call for negotiations with the DOC, perhaps under the forum of the Indo-US High Technology Cooperation Group (HTCG) to relax these controls to facilitate nuclear trade between the two countries for safeguarded facilities, which would be outside the framework of the 123 Agreement. What one can realistically expect on this front is access to dual-use items to be used in safeguarded heavy water plants but not even for the safeguarded reprocessing plant that is proposed to be built following this Agreement. Transfers to the unsafeguarded enrichment facility in any case cannot take place. Changes in NSG Guidelines may, however, ease transfers of these from elsewhere but this remains to be seen.

Prior consent to reprocessing spent fuel originating from U.S.-supplied fuel, (b) above, to extract plutonium for use in safeguarded fast breeder reactors, was perhaps the major issue to be resolved. India’s offer to establish a “new national reprocessing facility”, under safeguards in perpetuity, dedicated for safeguarded fuel clearly helped in resolving this (see Frontline, June 29). The agreement is similar to the rights given to Japan under the U.S.-Japan 123 Agreement.

Article 6 (iii) of the Indo-U.S. Agreement is concerned with reprocessing rights. The operative part reads as: “[T]he Parties grant each other consent to reprocess or otherwise alter in form or content nuclear material transferred pursuant to this Agreement and nuclear material and by-product material used in or produced through the use of nuclear material, non-nuclear material or equipment so transferred…and the Parties will agree on arrangements and procedures under which such reprocessing or other alteration in form or content will take place in this new facility. Consultations on arrangements and procedures (A&P) will begin within six months of a request by either Party and will be concluded within one year” (emphasis added).

From the above it is clear that this grants only the “consent” to reprocess in principle which cannot be made operative and turned into a right before A&P are agreed upon. Section 131 of the AEA, titled “Subsequent Arrangements”, would seem to apply to this provision in the Agreement and this is what Nicholas Burns, the U.S. Under-Secretary of State for Political Affairs and the chief negotiator for the U.S., gave to understand in his press briefing in Washington on July 27.

This implies a whole series of steps of certification by the U.S. administration and final approval by the Congress to the agreed A&P, which means that reprocessing rights are not, therefore, automatic. That is, Congressional approval of the 123 Agreement alone does not suffice though the probability of the Congress not approving does not appear high. However, Indian negotiators do not agree with this interpretation. In their opinion, reprocessing right would always be there and the A&P have to do with implementation details, such as appropriate safeguards, and, therefore, they do not have to go to the Congress for approval. This controversial perceptions of a key provision needs to be sorted out although this may not be of any great urgency. However, when actually can India make its request for operationalising its reprocessing right becomes uncertain on account of this. Article 14.9 provides for suspension of the A&P “under exceptional circumstances, as defined by the Parties”.

The clause does, however, provide for consultations to resolve the issue, “taking into account, the effects of such suspension on other aspects of cooperation”, and read with Article 14.3, it would seem to imply that “exceptional circumstances” would arise only when there is “material violation” as per the Vienna Convention on the Law of Treaties.

The italicised part in the consent to reprocess clause can be potentially serious in the event of a termination of the agreement for whatever reason, including testing. This part implies that nuclear fuel from whatever source is used in any U.S. supplied reactor, it becomes obligated to the U.S. and the consent to reprocess (or lack thereof) becomes applicable to that fuel as well.

Consider the following scenario. Following any termination of the agreement, the consent to reprocess in the future will also stand terminated. Article 16.3 grants continued consent to reprocess only as long as nuclear material subject already to reprocessing rights is on Indian territory (though there is some ambiguity how this article will be applied). Post-termination, and the consequent disruption of fuel supplies, India would be forced to source it from somewhere else, as provided for under Article 5.6(b) (ii-iv) on fuel supply assurances, to keep the U.S.-supplied reactors operating. But because the fuel is used in U.S. equipment, it is obligated to the U.S. and there is no longer any consent to reprocess spent fuel thus obligated. That is, spent fuel from a non-U.S. source used in U.S. reactors can no longer be reprocessed in the event of the termination of the Agreement. This is another issue that needs sorting out with the U.S.

“Fall-back safeguards”, issue (c), refers to application of bilaterally implemented safeguards, in conformity with IAEA principles and procedures, in case the IAEA is unable to implement the safeguards effectively. This would imply visit to safeguarded facilities by U.S. officials and inspectors. The original draft of the agreement had, like other 123 Agreements, provided for either of the parties complaining of inadequate safeguards. This, Indian negotiators, felt could lead to frivolous application of the provision leading to such charges often resulting in frequent access of Indian facilities to U.S. inspectors.

VIVEK BENDRE

In Tarapur when Unit-4 went critical, on March 6, 2005, (from left) S.K. Jain, Chairman and Managing Director of Nuclear Power Corporation of India Ltd., M.R. Srinivasan, former Chairman of the Atomic Energy Commission, M.K. Narayanan, National Security Adviser, and Anil Kakodkar, Chairman, AEC.

In the reworked agreement, Article 10.4 states, “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.” While this may seem more honourable and acceptable, the change is only notional. Because, it stands to reason that, if one party complains, the other party is not going to sit back and accept the unilateral judgment of the former. Consultations with the IAEA will naturally arise to verify the charge and any decision on bilateral arrangement will depend on the pronouncement of the IAEA.

While the Indian concern about the termination of the 123 Agreement in the event of a nuclear test, issue (d), would appear to be adequately addressed to take into account national security considerations under which such a compelling situation may arise there is no absolute immunity against it. Of course, as the Indian negotiators were at pains to say, the word “test” or “explosion” does not occur anywhere in the text, it is clear from the language used in Article 14 that a nuclear test is being referred to. What the clause provides for is a one-year notice period by the party invoking the right to terminate, during which consultations between the parties (as provided for under Article 13) can be held “to consider carefully the circumstances that may lead to termination or cessation of cooperation…[and] to take into account whether the circumstances that may lead to termination or cessation resulted from a Party’s serious concern about a changed security environment or as a response to similar actions by other States which could impact national security.”

However, it is important to point out that while the termination of the agreement can take place over a period of one year, Article 14.2 provides for cessation of cooperation at any time after the circumstance in question arises. Indeed, this should be so because, while the 123 Agreement has to do with the AEA and could have provisions for consultations and a time line of one year, Section 102 of the Arms Export Control Act (AECA), which will prohibit all exports to the party conducting a test, will come into play immediately, which is tantamount to a cessation of nuclear cooperation. The amendment provided for by the nuclear cooperation enabling legislation, namely the Hyde Act, is only for the AEA and not for the AECA.

However, the room for hedging provided for in the AEA can impact any decision on the cessation of exports under the AECA through a Presidential waiver. Also, depending upon the result of consultations, a Presidential waiver on cessation of cooperation in the event of a nuclear test after July 18 (following the Hyde Act), can also be given. To this extent, the impact of a test on the nuclear cooperation has been cushioned via the 123 Agreement. In the ultimate analysis, however, these situations are hypothetical because in the current circumstances it is extremely unlikely that any country would venture to conduct a test in the near term.

Section 123 a.(4) of the AEA requires that in the event of a nuclear test by the other cooperating (NNWS) party, and the consequent cessation of cooperation, the U.S. will have the “Right of Return” of nuclear material, equipment, non-nuclear material or components transferred under the 123 Agreement (issue (e) above). The agreement incorporates this right, as required by the Hyde Act, as a right conferred to both the Parties following the cessation of cooperation for any reason, including testing. It must be pointed out that this right is actually more than what the AEA or the Hyde Act demands, namely, right of return only in the event of testing. The present agreement has been forced to use such an all-inclusive language because India did not want the word “test” to occur in the agreement!

However, provisions in Article 14.5 of the agreement makes exercising the right involved and difficult by providing for consultations under the express recognition that “exercising the right shall have profound implications for their relations… Such consultations shall give special consideration to the importance of uninterrupted operation of nuclear reactors… Both Parties shall take into account the potential negative consequences of such termination on the ongoing contracts and projects initiated under this Agreement…” The Agreement incorporates the standard clause in all 123 Agreements that before the right of return is exercised and items removed from the territory, the affected party will be promptly compensated “for their market value and for the costs incurred as a consequence of such removal.” In particular for nuclear items, the agreement provides for evolving appropriate methods and arrangements for their return and the amount of compensation. These compound the problem of exercising the right of return.

Article 5.6 (a) and (b) provide for fuel supply assurances, issue (f), in case of disruption in supplies for reasons including cessation of cooperation (following a test, for instance). Significantly, Article 14.8 states: “It is not the purpose of the provisions of this Article regarding cessation of cooperation and right of return to derogate the rights of the Parties under Article 5.6.”

While multiple protective layers have thus been provided in the agreement to ensure continuous operation of reactors, including the one-year time line during which alternative mechanism of fuel supply could be firmed up through one of the three mechanisms (5.6(b)(ii-iv)) envisaged, it is far from clear that any of them is realisable, except perhaps for 5.6(b)(iii) for the creation of an Indian strategic reserve of nuclear fuel on Indian soil. But creation of such a stockpile (even in a phased manner) involves great uncertainty and huge costs (see Frontline, June 29). Similarly, there has been no instance when a country-specific fuel supply arrangement has been negotiated with the IAEA on a commercial scale, as envisaged under 5.6(b)(ii).

In the absence of more specific information, these provisions remain as vague as they were when the Prime Minister listed these in his statement after the separation plan of March 2, 2006. In fact, the drafting of this section in the agreement has been so bad that Article 5.6(b)(i) makes no sense; it seems to give the impression that the 123 Agreement is some other document. So, as of now, fuel supply assurances in the agreement appear to have only notional and political significance. More importantly, the draft India-specific safeguards agreement has to be negotiated with the IAEA, before the 123 Agreement can be sent to Congress for approval and this has to specify the “corrective measures” that India envisages to take to guard against the disruption of fuel supply when none of the above mechanisms can be worked and to ensure uninterrupted operation of reactors. Now India has not spelt out what these “corrective measures” are; in fact, it would appear that the government has not thought through this matter. Since even the NSG may desire that the IAEA safeguards are negotiated before it can consider India-specific amendments, to get safeguards worked out quickly is of paramount importance.