Cirrus Inc., a private Indian electronics firm has been indicted by the US Justice Department for exporting sensitive technologies from the United States to three Indian government entities over 2002-06. Apparently Cirrus Inc. supplied prohibited items like computer chips, microprocessors, semi-conductors, navigation and weapons guidance systems to the Vikram Sarabhai Space Centre, Aeronautical Development Establishment and Bharat Dynamics Ltd. All of them are engaged in weapons-related research and development. Cirrus Inc. was artful by exporting these items initially to Singapore, and had forged US Commerce Department authorizations to enable these purchases from US firms.

The timing of these disclosures is hugely embarrassing to India and the United States as they are struggling to negotiate the 123 agreement to operationalize the Indo-US nuclear deal. Frequent negotiations between the two countries and evasive replies to questions on their progress indicate that differences persist. After the 123 Agreement is negotiated, India has to reach an agreement with the International Atomic Energy Agency (IAEA) on safeguards being placed on the nuclear equipment, materials and technology supplied from abroad. Further, the Nuclear Suppliers Group (NSG) needs to relax its guidelines for making India an exception to enable it to receive nuclear technology despite not joining the Non-Proliferation Treaty (NPT) or accepting full-scope safeguards on its entire nuclear programme. Parallel discussions are proceeding with the IAEA and select members of the NSG, but these bodies are awaiting the finalization of the 123 Agreement. This is understandable since the United States broke ranks with the NPT regime, its own creation, to make India an exception to its mandate that nuclear technology will only be supplied to NPT signatories or countries placing their entire nuclear program under IAEA safeguards. Nor can this process be delayed. The Bush administration is under siege over the US's continuance in Iraq with no credible solution in sight. Equally, the authority of the Manmohan Singh government is dwindling with each further loss in the different elections being held in the country. As time proceeds, their ability to push through the 123 Agreement will seriously diminish.

The essential problem in finalizing the 123 Agreement is the pre-conditions laid down by the enabling US legislation (Hyde Act). Four are unacceptable to India; or, more accurately, the Atomic Energy Commission (AEC) that has a veto over all decisions on such issues.

First, the US seeks the return of all material supplied if India tests a nuclear device or commits an act which the US holds as prejudicial to its supreme national interests. Competent technical opinion believes that India has no credible nuclear arsenal, despite claims to the contrary by the AEC, and needs to test its nuclear devices to gain confidence in them. India has agreed to maintain a moratorium on nuclear testing under the Indo-US nuclear deal which, by definition, cannot preclude future testing forever. But this interpretation is unacceptable to the US.

Second, US approval would be required before any nuclear material supplied by it is reprocessed, which is unacceptable to India. Its experience with the uranium fuel supplied for the Tarapur reactors is instructive here, since the reactor wastes produced cannot be either reprocessed or returned to the United States, and continues to accumulate in 'swimming pool' type storages. But the US perceives this question within its larger non-proliferation policy, especially towards North Korea and Iran.

Third, India (read AEC) wants fuel supplies for the lifetime of the reactors supplied to avoid uncertainties in future supplies and disruption in power generation. The storage of uranium ore (yellow cake) or low-enriched uranium, its fabrication into fuel rods and later insertion into atomic reactors over long time-frames multiplies the risks inherent in these sensitive operations. Hence, this is unacceptable to the United States on safety considerations.

Fourth, India seeks assured access to nuclear technology transfers on general equity considerations, including equipment for enriching uranium, reprocessing plutonium and manufacturing heavy water. This is unacceptable to the United States on non-proliferation considerations, but also to honour its commitments to the guidelines of the Nuclear Suppliers Group (NSG).

This continuing impasse raises serious doubts whether the Indo-US nuclear deal is in jeopardy with time running out for a final decision being made. The revelations at this delicate juncture about the misdoings of Cirrus Inc. and prestigious Indian government agencies, coupled with the recent Agni III test, and the announcement of plans to develop an Intercontinental Ballistic Missile, which has obvious strategic implications for the United States, will further muddy the waters. A damage-limitation exercise has been mounted by the American and Indian administrations to highlight the trivial and technical nature of Cirrus Inc.'s infractions. Whether this succeeds and the Indo-US nuclear deal remains on track has yet to be seen.