Report of the IPCS Seminar held on 29 July 2008

Chair:
Maj Gen (Retd.) Dipankar Banerjee, Director, IPCS

Speakers:
Siddharth Varadarajan, Strategic Affairs Editor, The Hindu
Ambassador Arundhati Ghose, Former Permanent Representative of India to UN, Geneva
Professor PR Chari, Research Professor, IPCS

Siddharth Varadarajan

When India appears before the IAEA Board of Governors (hereafter referred to as the Board) on 1 August, it will stand before friendly countries that support India as well as hostile countries such as Pakistan that will seek to create new set of problems for the approval of the safeguard provision. For instance, a recent letter addressed by Pakistan to the Board details Pakistan's concerns over how the IAEA has approached the India-specific Safeguards Agreement (hereafter referred to as the Agreement). In this note, Pakistan aired its concerns on proliferation and how an Indian-specific rule would set a new precedent for states that are neither nuclear nor non-nuclear. This note has yet to garner any real attention; but, concerns stemming from its contents have been widespread. It is not likely that this would affect the ultimate verdict of the Board. The Board will most likely employ the favored Vienna consensus instead of using the voting mechanism. Countries may not wish to vote for this proposal, but also want to maintain their relationship with India. They can do so with the consensus method that allows them to save face by going along with the group.

Should the Board approve the Agreement, India will then move to the Nuclear Suppliers Group (NSG) where its fate is not as clear. In the July 2005 Agreement, President Bush pledged to gain Congressional backing and partner with allies to ensure the support of the NSG for India. However, that was then and this is now. In the years since this statement was issued, the American approach has changed a number of times due to domestic pressures, making the exact arrangement unclear. Will the US expect India to make compromises in the NSG now that its political fire has been put out? Or, will it build a coalition for the Indian case without expecting India to budge?

India may be pressed to move on issues such as reprocessing, enrichment, and testing. The NSG does not have policies on any of these issues; however, it is possible that non-proliferation states make this part of the NSG rule. If the NSG states decide to adopt new rules on these issues, it might spell trouble for India. Although India is disinterested in purchasing either reprocessed fuel or reprocessing plants, parts used for reprocessing are of interest due to economics of scale. Of greater concern is testing which has been a source of immense debate in India and other countries. Although the US laws addresses nuclear testing in previous legislations, France and Russia do not. But, if the joint cutoff issue becomes part of the NSG text, American law may be far reaching. This rule, found in the Hyde Act, stipulates that if one country cuts of supplies, all countries must.

The American Ambassador to India, David Mulford, recently stated that the US will push for a "clean, but not unconditional offer," meaning that the US will press the NSG to examine all pieces of the puzzle, with special attention to the rapidly decreasing American timeline. Some have speculated that the US may try to make the NSG agreement "conditional" and ensure that the final leg be completed before the NSG states, such as France and Russia, can trade with India. Whether such constraints will be added is unclear. Should the deal make it through the NSG and later encounter opposition in the Congress, France and Russia will probably wait just a year before seeking to make their deals operational. It is not likely for such a situation to arise because a block by the US Congress would mean the commercial wing of the American nuclear establishment would miss out on a tremendous opportunity that would then benefit other countries.

Even if the 123 Agreement quickly passes through the well-known stages, a significant amount of time will lapse before the deal is truly operationalized. The Agreement is not on "auto-pilot," as some have argued. Even if the IAEA and NSG give India the green light, the nuclear establishment will still need to distinguish military from civilian facilities in order to identify the facilities that will come under Safeguards. Safeguarded facilities must be placed on the list located in the Agreement's Annex, if a location is not listed in this space it is not subject to Safeguards. Another part of the process is creating terms for fuel agreements, which he predicts will take a year to negotiate. So, after India completes the well-known steps, it will still need some more time for the deal to fructify.

India's Dr. Jekyl and Mr. Hyde approach to the Agreement is a matter of concern. In domestic circles, the Indian government highlights the "India specificity" of the agreement and painstakingly points out how this text is different from previous agreements it has signed, in particular the INFOCIRC/66-type agreements signed for Tarapur. However, the line the government toes with the IAEA is much different. When Foreign Secretary Shiv Shankar Menon briefed the Board in advance of the 1 August meeting, he illustrated how the Agreement mirrors INFOCIRC/66 texts, taking care to point out that this Agreement is an "umbrella agreement" that will pertain to the entire nuclear establishment.

India is still not truly aware of the costs that are attached to the Agreement. It is important to make simple economic calculations, such as the price of nuclear reactors, fuel reactors and one unit of nuclear energy in order to understand the true costs of the deal. This Agreement allows India to expand its energy matrix, but before it does, India should examine the Agreement further before making large-scale purchases or adjusting the importance of nuclear power in its energy matrix.

To conclude, the US was keen to offer this agreement to India as it met its strategic aims. The Agreement served American interests in balancing its relations between India and Pakistan. The US presented Pakistan with an opportunity to purchase F-16, in 2005, and had to balance this action by offering a similarly attractive package to India. In addition, this deal would also meet other strategic goals, namely, influencing the direction of India's foreign policy.

Prof PR Chari

As pointed out by Mr. Varadarajan, the costs and benefits of the deal were never really examined as they should have been. Although the political imbroglio appeared to be centered around the nuclear issue, in reality the true fight was over the future of the government. Rather than examining the costs of foreign vs. domestic reactors and determining whether it was logical to expand the role of nuclear power, Indian politicians focused their energies on cross voting, defection, and how to appease potential supporters and dissenters. The failure of the government to understand what it was going forth with is perhaps the biggest cost of the deal.

Moving past the costs of the deal, there are five sources of contention. The most controversial issue associated with the deal is nuclear testing. Although the 123 Agreement doesn't specifically address testing, previous US legislation, including the Glenn Amendment, would enter into force if India tests.

Moving to organizational concerns, India's strategic concerns will not be compromised by allowing IAEA Safeguards. As India will separate its facilities and choose which facilities it will place under Safeguards, sensitive areas will not be subject to international inspection.

Another question that has been the source of concern for India and non-proliferation states alike is whether India will be recognized as a nuclear weapons state by signing the agreements with the IAEA, NSG or the US. The answer to this question is a simple no. Nuclear weapons states are defined in the NPT and India is not a signatory.

It has been debated whether this agreement automatically provides India with nuclear technology. The answer to this question is not as clear. Given the sensitivity of the technology and materials, it is uncertain whether rules will be adjusted to permit their sale to India.

Finally, the last issue is related to whether India's foreign policy will be constrained as a result of the 123 Agreement. In many ways, this has already begun to take effect. The Hyde Act demand that India must adjust its foreign policy has already been met twice - India's votes against Iran in the IAEA, first, in March 2006 and later in September 2006.

Keeping the above issues in mind, India is certain to witness opposition at the IAEA and NSG. To begin with, Pakistan has expressed procedural and substantive objections, already highlighted by Mr. Varadarajan. Pakistan's request for the normal forty-five days period of review to examine the intricacies of hybrid agreement and masked request for a similar benefit to be extended to "other states" are designed to spark a basic debate on these issues. These may, or may not, arise in the Board meeting.

India could witness similar actions from China at either the IAEA or NSG. Although "everyone" is certain that China will go along with the consensus, it has carefully worded its statements so one cannot be certain. The position of the Scandinavian countries, Japan and Australia, and whether American pressure will force them to alter their stance also remains unclear.

Finally, the most pressing issue remains whether the 123 Agreement will supercede the Hyde Act, if passed. The American President may use a signing statement as an overriding waiver to pass the123 Agreement, thus making the Hyde Act irrelevant. But, whether such an action may happen is questionable. Given the shrinking legislative timeline in the US, it is not certain whether the final step will occur during the current administration or be passed to the next. The US requires ninety-one days to pass legislation and the Hyde Act demands that there are thirty days of continuous session.

Amb Arundhati Ghose

In the NPT there are three categories of countries. The first are the 'nuclear weapon states', the second are the 'non-nuclear weapon states' and the third category are 'others.' Both India and Pakistan fall in the last category as possessors of nuclear weapons but who are not a party to the NPT. Therefore, India has been subject to decades of nuclear isolation, meaning that civilian nuclear cooperation with the "nuclear world" was not possible. Therefore, the nuclear agreement was a part of India's nuclear global discussion to end its nuclear isolation. Thus this deal opens up the nuclear fuel supply of the US and other countries to India, if it goes through. This deal would facilitate nuclear commerce with other countries like Russia and France.

Pakistan's opposition to the nuclear deal is not likely to have an impact given its reputation regarding nuclear proliferation. Countries that are opposed to the nuclear deal at the IAEA may try to avoid a vote. But, if it is put to vote countries may choose to abstain rather than vote against to maintain good political and economic relations with India.

At the NSG there is a likelihood of a vote taking place. It is believed that there will be abstentions from the vote which will help India. The question is who will call for a vote? China is not considered a country that will potentially call for the vote as it does not want to be seen as an enemy of India, which would push it closer towards the US.

Once the deal is at the NSG stage, the US will not be the only state talking to other countries. Russia is also very keen on seeing this deal go through, due to commercial interests. This deal will help Russia increase its nuclear commerce with India. Russia has offered four more nuclear reactors to India, in addition to previously agreed frameworks. France is equally interested to see this deal through, for the same reasons as Russia.

Any obligation that India has to fulfill is not one sided, but is reciprocal in nature. For example, the separation plan proposed will be tied to the fuel supply to India. This implies that if the fuel supply stops, then India need not follow the separation plan and keep its end of the deal. Therefore, the Additional Protocol (AP) would not necessarily be "additional" to the existing Safeguards Agreement. A new Safeguards Agreement will be implemented only after the existing one is suspended. That said the DAE may have a draft of the AP in mind that would be most beneficial and acceptable to India, in light of the 2010 review of the NPT.

Furthermore, this deal will also lead to the end of the technological denial. While this is true only on the civilian nuclear corporation front, this new partnership may potentially extend to other areas such as space and nanotechnology.

Discussion

Technology transfer

• If the deal goes through, the technology transfer will be limited to the civilian nuclear energy sector. Although there is not an automatic waiver on technologies, this step is likely to have a 'positive signaling effect' that may affect the transfer of technology in other sectors, such as space and nanotechnology.
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• India will also be given an opportunity to export its reactors. Although there is no rule today that restricts it, India is only able to trade with countries outside the NSG, as it is not a signatory to the NPT.

Nuclear Weapons Test

• If India wants to test a nuclear weapon, it must do so after securing a strategic reserve of nuclear fuel that will last at least seven years. The 'right of return' that pertains to US materials will allow it to take back its reactors and nuclear fuel should India test a nuclear weapon. It will also result in the suspension of fuel from the US and a handful of other countries.
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• France and Russia have not made nuclear testing as an issue and do not have legislation that would halt their nuclear commerce should India test.

Hyde Act vs. 123 Agreement

• The Hyde Act enables the US to halt the fuel supply at any time. However, even in the absence of the Hyde Act, the US Congress can potentially pass a similar law that could potentially "undermine" the 123 Agreement.
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• The Hyde act is simply an enabling act for the 123 Agreement to take place. Once adopted by the US Congress, it would become the 'latest expression of US sovereign will "and will not necessarily supersede the 123 Agreement." The Samajwadi Party has recently suggested that India adopt its own version of the Hyde Act to give India a cushion against the Hyde Act.

NSG: Road Ahead

• In addition to the US, countries like Russia and France will actively promote the nuclear deal at the NSG. Countries who are not in favor of the 123 Agreement may abstain rather than vote against India, considering their political and economic ties with India.