India and the US-India Agreement for Civil Nuclear Cooperation

Although it is nearly two years since the July 18, 2005 Joint Statement between President George Bush and Prime Minister Manmohan Singh announced their intention to facilitate civil nuclear commerce between India and the members of the Nuclear Suppliers Group, the process is still to be completed with even the first step towards that goal, an Indo-US agreement for peaceful nuclear cooperation, still under negotiations with apparently strong differences between the two countries on a number of issues. Expectations are that the agreement may be finalised by the end of this year. It is, however, most unlikely that the critics of the agreement, both in India and the US, would be happy with the 123 agreement when it is agreed to by both parties. It is, of course, altogether another matter whether they would be satisfied with any 123 agreement! Nevertheless, it would be useful to consider the form a final 123 agreement may take and analyse how it addresses the concerns of both countries. At this point, it would be useful to consider the generic form the US-India 123 agreement should take rather than over analyzing individual components.

Before analysing the issues relating to the 123 agreement, however, some factors have to be kept in mind. Firstly, India is still classified technically under US law as a non-nuclear weapon state and therefore the 123 agreement has to conform to the US legislation applicable to non-nuclear-weapon states. Two, it is extremely unlikely that the US Congress would amend any more laws to accommodate India. Three, India is, however, a de facto nuclear weapon state and accepted as one by the United States and the rest of the international community. Therefore, as a responsible nuclear weapon state, it cannot accept any conditions that would have the effect of degrading its nuclear deterrence. Four, the 123 agreement, in its final form, should (i) enable India to access equipment, components and materials immediately needed like, for example, reactors, fuel etc; (ii) not expressly deny India anything that it may need in the future; and (iii) leave open, if necessary after further negotiations, access to items currently not supplied. Finally, the 123 agreement should not result in any economic loss to India as a result of any unilateral US action.

Section 123 of the US Atomic Energy Act (AEA) requires a 123 agreement to include nine conditions. Of these, one has been exempted for India by the Hyde Act passed last year. The India 123 agreement is required to include the other eight – 123 a(1) and a(3) through a(9). Can a 123 agreement be fashioned within these constraints? It should be possible and that is probably the reason why both countries have been expressing confidence in this regard. This essay concerns itself with the main objections that have been voiced in India and suggests measures to handle them within the parameters outlined above.

Return Clause

One of the sticking points has been the provision of Sec. 123 (a)(4) of the Atomic Energy Act (AEA), which gives the United States the “right (in agreements for cooperation with non-nuclear-weapon states) to require the return of any nuclear materials and equipment transferred and any special material produced through the use thereof, if the cooperating country detonates a nuclear explosive device…” India rightly fears that the enforcement of this provision, in full or in part, would result in heavy financial loss to India as a result of the closure of the reactor(s). There are two immediately available avenues to protect India against such loss.

The first would be for the US President to exempt the 123 agreement from the requirement of Sec. 123(a)(4) – which is allowed under the AEA – with a determination that the “inclusion of such a requirement would be seriously prejudicial to the achievement of the United States non-proliferation objectives or otherwise jeopardize the common defense and security.” It would not be difficult to establish that the failure of the 123 agreement, and the consequent isolation of India from global nuclear civil nuclear commerce, would affect US non-proliferation objectives. And the procedure for the Congress to ratify such an agreement would be identical to the procedure for ratification of a 123 agreement with such a clause. If Congress chooses to reject such an agreement, then the blame for the failure of the Indo-US agreement would lie at its feet and not the two governments.

If, however, for any reason such an action is not considered to be feasible, then the 123 agreement which includes Sec. 123 (a)(4) can be drafted to include one or more of the following two additional clauses. The first would be an unconditional requirement that the United States should take back all the equipment and materials transferred and moreover bear the costs associated with such a transfer! There has never been a case so far of any used reactor being transported to any other place. One cannot conceive any state in the US willing to receive a used reactor, and a foreign one at that, in its territory. In fact India should insist on the United States exercising the right of return of a reactor in case it decides to conduct a nuclear test!

The second would be to require that the United States compensates India for all the losses it would have to bear on account of the closure of the reactor, including costs associated with the loss of revenue on account of closure, loss on account of replacing the transferred reactor with another indigenous reactor and other costs that may occur as a result of the return of the transferred reactor and materials. Such a clause in the 123 agreement would not be unusual. Art. 12(4) of the US-Japan 123 agreement, dealing exactly with such a possibility states “Before either party takes steps to cease cooperation under this Agreement, to terminate this Agreement, or to require such return, the parties shall consult for the purpose of taking corrective steps and shall carefully consider the economic effects of such actions, taking into account the need to make such other appropriate arrangements as may be required.”

At the time of submission of the 123 agreement with Japan, the US Nuclear Regulatory Commission had voiced its reservation over this aspect of the 123 agreement. In response to this reservation the US State Department, with the concurrence of the Department of Energy, had submitted that “The requirement that consideration be given to the economic effects of termination or suspension merely takes account of the reality that both parties have a very large economic investment in their civil nuclear power programs.”

Thus it is possible to allay Indian fears of possible financial loss on account of the United States requiring the return of transferred equipment and materials by inclusion of these two additions or variations thereof.