Indo-US Nuclear Deal-the Real Story

The Indo-US nuclear deal has been touted as one of the key foreign policy achievements of the current administrations of both nations. This line is not being accepted without reservations, at least in India. As this debate heats up, let us review what India wanted from the nuclear deal, what we finally got and at what price.

Background to the negotiations

The fuel for nuclear reactors is derived from uranium ore. Heavy water reactors use natural uranium (without enrichment) as fuel. All the reactors used for power generation in our country are heavy water reactors, except for one reactor at Tarapur. There are a few uranium mines in our country and the ore from these mines is used to supply fuel to our existing fleet of reactors. Although uranium ore is traded on the world commodity market just like gold or silver, India is not allowed to buy it because of the nuclear apartheid regime put in place after the 1974 weapon test. So far, the uranium production in our country has been able to meet the consumption rate of our power reactors and we have not yet felt the pinch of this restrictive regime. But we are very close to the critical point where the demand for uranium ore will exceed domestic supply. A couple of years back, the government realised that unless imported uranium was made available, all our operating nuclear power plants would have to be de-rated due to the limited availability of fuel. This was the fundamental justification for the Indian government to open negotiations with the United States for the nuclear deal.

Over the last ten years, the American Government and energy companies have been watching an economically resurgent India conclude multi-billion defense deals with the Russia, Israel and other countries with increasing frustration. As long as India remained a nuclear pariah, they could not sell military or nuclear hardware to India.

This is the backdrop against which negotiations over the Indo-US nuclear deal commenced. All India needed was access to the global market for uranium ore. Access that had been denied by a patently unfair trade regime. But the US government was not interested in restricting the discussions just to the supply of uranium ore. They wanted to tap the full trade potential likely to accrue from sale of power generation and defense equipment to India, estimated to be worth hundreds of billions of dollars.

After nearly three years of protracted discussions, an agreement has been hammered out between the two countries. Let us take a look at what the report card shows.

What has India gained?

India’s primary requirement of being allowed to import uranium ore has been met. Based on media reports, it appears to be a matter of time before an agreement with the Australian government is signed in this regard. India has also been allowed to import enriched fuel for the Tarapur reactor without jumping through hoops as we have been doing for the last three decades.

India has also been conditionally given reprocessing rights for the imported fuel and ore. What this means is that India will be allowed to extract plutonium from the imported spent fuel and use it in our fast breeder programme. This clause of the deal comes with a rider; “the details of the separation process will be worked out during further consultations”. Translated into plain language, “further consultations” means “intrusive inspections”.

Apart from this, India has not gained anything. The Americans have not parted with enrichment, reprocessing and heavy water technologies since they are considered dual use. They have not offered any assistance for India’s fast breeder programme. They have not agreed to share any nuclear related technology such as metallurgy, component fabrication processes, cross section libraries, computer codes etc.

What has India lost?

Let us tackle the emotional issue first-the restriction on further testing of weapons. The whole concept of nuclear deterrence is to make one wary of the repercussions of attacking an opponent who has nuclear weapons. Whether the opponent’s weapon is twice, thrice or half as powerful as the Hiroshima bomb does not matter. The terrible capacity for devastation of a single bomb also makes it irrelevant if a country has five bombs or fifty. India has tested fission bombs successfully. The thermonuclear weapon test was only partially successful. What this implies is that India definitely have the capacity to kill five million people in one shot but the capacity to kill fifty million at one go is in doubt. So what? Maybe some of us are making more out of this issue than necessary. The real problems in this deal are economic not strategic. Let us examine them one by one.

This deal opens the door for India to import power reactors. Why is this a loss and not a gain? Now there is no problem with imported reactors as such. They are a safe, proven and reliable source of energy. However the cheaper alternative would be to build indigenous coal and nuclear power plants. This would prevent billions of dollars of capital investment from going to foreign companies. To set up new power plants, Indian companies like NTPC, NPCIL and the Tatas will buy steel locally from companies like SAIL and TISCO. Indian companies like L&T, BHEL, WIL and Godrej will manufacture the turbines and other components of the power plants. In this way, the taxpayer’s money will flow back to shareholders of Indian companies and stimulate the Indian economy. Is this not preferable to buying equipment from foreign conglomerates like GE or Areva and making their shareholders richer? Setting up new plants can directly and indirectly generate employment for tens of thousands of Indian workers. At a time when unemployment for young Indians is rising, do we really want to send all these jobs overseas?

Once this deal is ratified by the US congress, we are likely to see heavy pressure from the Americans forcing India to buy expensive and obsolete military hardware from them. This is not some vague left wing apprehension. They have already managed to sell an old, decommissioned amphibious ship, the USS Trenton, to the Indian Navy. The Indian Air Force is being offered F-16 aircrafts that were considered cutting edge-thirty five years ago! Before getting too deeply involved, the Indian Government must remember that the US is not the most reliable of arms suppliers. Pakistan is yet to get delivery of F-16 aircrafts that it paid for more than ten years ago. The Indian Navy’s fleet of Sea King helicopters were starved of spares during the American trade embargo imposed in the aftermath of Pokhran-II. At the present time, India already has its hands full supporting the Russian economy by buying white elephants like the aircraft carrier Gorshkov from them. Why should we take on the additional responsibility of supporting the American economy as well?

Once India buys American reactors and military hardware, we can expect the US government to use this leverage and give us friendly advice on our domestic and foreign policies, a practice that General Musharraf is quite familiar with. Implicit in this Indo-US agreement is the loss of Iran as a supplier of oil and gas to India. India can now just forget about building the proposed gas pipeline from Iran - the Americans will just not permit it. This deal may have opened up a new source of energy to India but we have surely lost access to one of largest known oil reserves in the world.

A dubious privilege granted to India as a sweetener to this deal was full partnership in the International Thermonuclear Experimental Reactor (ITER) project. This is an experimental fusion reactor being built in France by a consortium of six countries. India has now been granted admission into this exclusive club. The membership fee is $360 million every year for the next nine years. This money will be used for construction of the experimental reactor. Many more millions or perhaps billions of dollars will be required for operating and maintaining this facility. Fusion research is a bottomless well and even its most optimistic proponent does not predict that fusion will be a viable source of power in the next fifty years. With the billions of dollars that India has now committed to the ITER project, we could have added power generation capacity of 3000–4000 MW in the next three years. It is quite inexplicable why the Indian government prefers to chase the mirage of fusion power instead of alleviating the present power generation shortfall .

These negotiations show American diplomacy at its best. They are taking money right out of our pocket while giving the appearance that they are doing us a favour! This agreement makes very little headway towards capping of India’s strategic programme. Yet the response of non-proliferation lobby in the US, normally so vocal, is strangely muted. Why so? Clearly the windfall for American business that this agreement promises to bring has overshadowed all other concerns.

How well have India’s negotiators done in safeguarding India’s interests? They have succeeded in obtaining the right to import uranium ore but that is just a sideshow to the main story. All the hue and cry in the media about restrictions on testing is also nothing but a smokescreen to conceal the actual damage to Indian interests. The real goal of this agreement was to carefully prepare the stage for the GEs and the Bechtels to secure multi-billion dollar deals and for the Indian taxpayer to foot the bill. This has been achieved.

What is the future impact of this Agreement?

Amendments to the Atomic Energy Act to allow private players in the nuclear power sector are in the offing. Unimaginable capacity addition targets (78,577 MW!) have been put in the 11th 5-year plan to justify profligate spending (estimated at 10.31 lakh crores) in the power sector. How has the power ministry arrived at this inflated requirement? Is there a steel mill coming up in every town of India in the next five years? Stories have been planted in the media about the catastrophic loss to the Indian economy in case these power generation targets are not achieved. The limitations of capacity of Indian power generation equipment manufacturers like BHEL are being highlighted. All this media manipulation is being done to stampede rational decision making and to make the high cost of imported power plants more palatable.

These are classic techniques that have been repeatedly used by the Americans in the last 50 years to lure gullible countries into investing in mega infrastructure projects. The beneficiaries of these infrastructure deals are invariably American companies. A cursory glance of Indian media articles of the Nineties will show how similar techniques were applied to make the Enron deal acceptable. A wide swathe of academics, political and economic pundits argued on behalf of Enron in print and on television. Public opinion was swayed in Enron’s favour till the Dabhol power plant started producing electricity at a prohibitive cost in 2001. That’s when people realized the real cost of the Dabhol project and the full implications of its infamous power purchase agreement.

Have we learned nothing from the mistakes of Dabhol?