PTI

Prime Minister Manmohan Singh and President George W. Bush meet in Hokkaido, Japan, on the sidelines of the G8 summit in July.

AT the end of a three-day, marathon sitting at the second round of the Plenary Session of the 45-member Nuclear Suppliers Group from September 4 to 6 in Vienna, the United States managed an India-specific waiver of the group’s guidelines on nuclear transfers by NSG members to non-nuclear weapon states (NNWSs), as it had promised in the George Bush-Manmohan Singh Joint Statement of July 18, 2005. In that statement President George Bush had stated: “The U.S. will work with friends and allies to adjust international regimes [read NSG] to enable full civil nuclear energy cooperation and trade with India….”

At the earlier meeting, on August 21-22, also in Vienna, the initial draft waiver moved by the U.S. was rejected by most members as “it had no conditionality whatsoever”, as one diplomat from a country opposing the waiver said. India had always conveyed to the U.S. that it desired that the waiver should be “clean and unconditional” – clean in the sense that it should enable full nuclear cooperation and trade in all aspects of the fuel cycle, and unconditional in the sense that no conditions should be imposed beyond those already contained in the NSG’s guidelines, both for Trigger List items (goods and technology directly related to the nuclear fuel cycle) and for nuclear dual-use items. In fact, one report said that in all 50 amendments to the waiver had been moved through individual country statements at the conclave.

Article 4 of Guidelines I (INFCIRC [information circular]/254/Rev.9/Pt.I) governs nuclear transfers to NNWSs. Article 4(a) says (in the main): “Suppliers should transfer Trigger List items or related technology to a non-nuclear-weapon state only when the receiving state has brought into force an agreement with the IAEA [International Atomic Energy Agency] requiring the application of safeguards on all source and special fissionable material in its current and future peaceful activities [full-scope safeguards or FSS].” Article 4(e) says: “Suppliers reserve the right to apply additional conditions of supply as a matter of national policy.”

Transfer of dual-use items is governed by Article 2 and Article 4(a) and (b) of Guidelines II (INFCIRC/254/Rev.7/Pt.II). Article 2 says (in the main): “Suppliers should not authorise transfers of equipment, materials, software, or related technology… for use in a non-nuclear-weapon state in a nuclear explosive activity or an unsafeguarded nuclear fuel-cycle activity; or, in general, when there is an unacceptable risk of diversion to such an activity, or when the transfers are contrary to the objective of averting the proliferation of nuclear weapons.”

Article 4(a) and (b) say (in the main):

“In considering whether to authorise transfers, suppliers should exercise prudence… and should take relevant factors into account, including:

“(a) Whether the recipient state is a party to the Nuclear Non-Proliferation Treaty (NPT) or to the Treaty for the Prohibition of Nuclear Weapons in Latin America (Treaty of Tlatelolco), or to a similar international legally binding nuclear non-proliferation agreement, and has an IAEA safeguards agreement in force applicable to all its peaceful nuclear activities;

“(b) Whether any recipient state that is not party to the NPT, Treaty of Tlatelolco, or a similar international legally binding nuclear non-proliferation agreement has any facilities or installations [related to unsafeguarded fuel-cycle activity] that are operational or being designed or constructed that are not, or will not be, subject to IAEA safeguards.”

Much of the opposition to the proposed draft waiver related to the absence of a condition of revocation of the waiver and automatic termination of supplies in case India tested a nuclear device, something which the Hyde Act provided for the U.S. Many countries argued that the Hyde Act provisions should be included as conditions in the waiver so that everyone traded with India on an equal footing. India, however, held the view that since Article 4(e) of NSG Guidelines I provided for national policy consideration on any contentious issue such as testing, it should be left to the individual governments to decide.

Among the potential suppliers of nuclear goods, which essentially are Russia, France and the U.S., and perhaps Japan via its holding in Westinghouse, only the U.S. has a termination of nuclear cooperation agreement in the event of a nuclear test by the cooperating country via Section 129 of the Atomic Energy Act (AEA). Russia implemented the agreement for the supply of the Kudankulam reactors after the 1998 nuclear tests by India. In addition, during the first round several NSG members wanted a formal review mechanism. India said that was a red line for it as it would put huge investments in jeopardy.

On September 4, at the second round of the Plenary Session of the NSG, the U.S. moved a revised draft waiver. Critics, however, slammed it saying the changes made were merely cosmetic. The changes, while accommodating India’s request for the waiver to be “clean and unconditional”, included in the main a clause that provided for NSG members to notify one another of exports to India and also exchange information about individual bilateral agreements with India. Another important change was the inclusion of a provision for consultations of the participating governments in accordance with Article 16 of Guidelines I in the event “one or more” members considered that circumstances that called for consultations had arisen.

Specifically, Article 16(c) says (in the main): “In the event that one or more suppliers believe that there has been a violation of supplier/recipient understanding resulting from these Guidelines, particularly in the case of an explosion of a nuclear device, or illegal termination or violation of IAEA safeguards by a recipient, suppliers should consult promptly through diplomatic channels.... Upon the findings of such consultations, the suppliers… should agree on an appropriate response and possible action, which could include the termination of nuclear transfers to that recipient.”

The waiver was agreed upon by consensus, as is the NSG policy regarding any decision it takes, and passed on September 6. This came as a huge surprise because until late into the night of September 5, it had seemed that the hold-out countries, such as New Zealand, Austria, Switzerland, Finland, Japan and the Netherlands, which had organised as a pack, would not relent. China, too, seemed to go along with the group. Besides all the behind-the-scenes diplomatic manoeuvres by the U.S. as well as India, Minister for External Affairs, Pranab Mukherjee issued a unilateral statement detailing India’s non-proliferation commitments. This seemed to have the effect of imminent softening of the hardened stand by the hold-outs. Indeed, calling it a historic decision, the Presidential Determination on the requirements of the Hyde Act provisions (see article on page 12) confirms that the Minister’s statement “was helpful in garnering additional momentum towards consensus”.

However, a proper reading of the statement would show that the commitments are merely a reiteration of the bilateral commitments made by India as part of the July 18 Joint Statement and they are not essentially different from the commitments included originally in the revised draft waiver. Significantly, the final waiver makes an explicit reference (in Para 3) to Pranab Mukherjee’s statement and says (see box): “Based on the commitments and actions mentioned above [in Para 2], as reiterated by India on September 5, 2008, and without prejudice to national positions thereon, Participating Governments have adopted and will implement the following policy on civil nuclear cooperation….” The italicised part is a reiteration of the provision 4(e) of Guidelines I.

Now what does the waiver that has been granted to India imply? Para 5 of the final waiver text calls upon the Chair of the NSG, namely Germany, to submit it to the IAEA Director General with a request to circulate it to all member-states. An NSG press release from Vienna dated September 6 said: “The NSG will ask the Director General of the IAEA, Mohamed ElBaradei, to publish its decision as an INFCIRC document” (emphasis added). It is important to note that till date the IAEA has not issued a circular regarding the waiver. It is quite conceivable that Germany, at the request of the U.S., has not yet forwarded the text so that non-U.S. companies do not get a head start over U.S. companies who have to wait until the India-U.S. bilateral 123 Agreement is passed by the U.S. Congress. As it appears, especially after the Senate hearings of September 18, this may not happen in the current session and a lame-duck session in December may be required.

While the waiver is as clean and unconditional as possible, it is far from being a totally clean and unconditional change of the NSG rule that India had hoped for. More importantly, the waiver has converted the commitments given by Prime Minister Manmohan Singh bilaterally to the U.S. on July 18, 2005, in particular the unilateral moratorium on testing, into multilateral commitments (to a group of 45 NSG member-states). Para 3 makes it explicit that these commitments form the basis of the waiver provisions.

Though India is not part of the NSG, it has agreed that it will unilaterally adhere to not only the present NSG guidelines but future amendments without having a say in the adoption of these amendments, even if these amendments are inimical to India’s interest. In fact, there is a dilution in this regard from the original draft moved on September 4. In that, Para 4 had required the NSG Chair to review proposed amendments with India as well enabled India to participate in the decisions regarding proposed amendments. Now both the above italicised expressions – “review” and “participate” – have been changed to “consult”, thereby not allowing India to have even marginal influence in the decisions.

The important change effected in terms of Para 3(c) and (e), which allows exchange of information pertaining to transfers to India of both Trigger List and nuclear dual-use items as well as consultation, has the limiting effect of all suppliers acting in sync as regards materials and equipment that are transferred to India. That is, if a member like the U.S. wishes to prevent a certain transfer by another supplier, it has the means to do so. This too satisfies the requirement of the Hyde Act, which requires that the U.S. should prevent transfers from other countries of items that U.S. laws do not permit. The consultative process also provides a mechanism to monitor India’s compliance with its non-proliferation commitments.

Consider the issue of Enrichment and Reprocessing (ENR) technologies. Though the NSG Guidelines I call for restraint under Articles 6 & 7 in transferring ENR technologies, they do not prohibit such transfers. The waiver too does not put a ban on such transfers. However, it is U.S. policy not to transfer these. So if India tries to source these from France or Russia, the U.S. could ensure that it is stopped.

As such, according to reports, after the waiver approval, all the members informally but consensually agreed that they would not transfer ENR technologies. In general, there appears to have been a consensus not to engage in full nuclear trade with India.

There is then the contentious issue of nuclear testing. Though the waiver does not refer explicitly to nuclear testing, the consultative process (Article 16) will ensure that cooperation and trade, particularly fuel supply, will be terminated immediately in case India tests, notwithstanding the circumstances that led to it. Indeed, the commitment on a moratorium on testing extracted from India multilaterally ensures that India will have to face termination of supplies immediately if it conducts a test.

Of course, circumstances that would require India to test cannot be foreseen in the near future. So, given this scenario, India can begin to negotiate with potential suppliers in member-countries other than the U.S., in particular France and Russia, though there appears to be a tacit understanding that India will not do so until the 123 Agreement is passed. The MEA has, however, gone against this assurance in the wake of recent pronouncements on U.S. interpretations of the agreement, which India does not agree with (see article on page 9).

But for the Indian strategy to work, first an INFCIRC has to be issued on the waiver text by the IAEA, which is yet to happen. More pertinently, India has to enter into bilateral agreements with countries such as France and Russia to buy their reactors. In this context, it is pertinent to point out that Russia has enacted a domestic law requiring FSS for transfer of reactors and other Trigger List items. This will have to be amended first. But, having supplied the Kudankulam reactors, Russia has an edge over other potential suppliers because the Russian reactors have already been type-certified by India’s Atomic Energy Regulatory Board (AERB). So Russia could quickly begin to implement the proposal to supply four to six more Kudankulam-type 1,000 MWe reactors. France has already surveyed the Jaitapur area in Maharashtra for the supply of 1,600 MWe reactors of Areva, whose design is being built in Finland and faces inordinate delays and cost overruns.

But the key issues that would decide the supplier are: (1) assured supply for the lifetime of the reactors or to build up a stockpile to avoid disruption in supplies. (There is no restriction in the waiver on the amount of fuel India can, in principle, import); and (2) the right to reprocess the spent fuel under safeguards. The latter, however, is a vexing issue. The U.S. has not given this upfront under the 123 Agreement owing to provisions in its AEA. Also, as per the 123 Agreement, reprocessing right can be given only if India establishes a dedicated reprocessing facility. Moreover, these reprocessing rights are not permanent.

There are no such constraining policies in France and Russia with regard to reprocessing, as is evident from the Kudankulam case, where India has secured lifetime fuel supply and reprocessing rights. Recent pronouncements by the French Ambassador in India suggest that France, too, will be willing to grant reprocessing rights upfront. So, in sum, the NSG waiver before the 123 Agreement has put U.S. firms at a disadvantage, but still there are many imponderables. Also, there is the question of financing at the rate of about $2 million per MWe. With an arbitrarily pronounced goal of importing 20,000 MWe by 2020, where will this huge sum come from?