American investment in Indo-US nuclear deal goes down the drain….


As the experts, wary of Indo-US nuclear deal were anticipating, the worst has started taking place. The deal which was supposed to signal a new era of strategic and economic cooperation between India and the United States seems to have fallen apart. Those who were eying the deal to reap mammoth benefits for American economy have started feeling frustrated. And Pakistan, which tends to view India’s every move on the global chess board as a zero-sum game, and had registered its unhappiness by ramping up its capacity to produce weapons-grade plutonium with two new Chinese-supplied reactors, is unsure of the future development on this so-called deal. When the deal is falling apart, it has serious and dangerous fallout for the Americans. The major risk is that other countries, particularly Russia and France, might benefit from all the hard work that the United States put into the deal.

The details of the deal include the following:

  • India agreed to allow inspectors from the International Atomic Energy Association (IAEA), the United Nations’ nuclear watchdog group, access to its civilian nuclear program. By March 2006, India promised to place fourteen of its twenty-two power reactors under IAEA safeguards permanently. Teresita Schaffer, director of the South Asia program at the Center for Strategic and International Studies, says these will include domestically built plants, which India has not been willing to safeguard before now. India has promised that all future civilian thermal and breeder reactors shall be placed under IAEA safeguards permanently. However, the Indian prime minister says New Delhiretains the sole right to determine such reactors as civilian.” According to him: “This means that India will not be constrained in any way in building future nuclear facilities, whether civilian or military, as per our national requirements.” Military facilities-and stockpiles of nuclear fuel that India has produced up to now-will be exempt from inspections or safeguards.
  • India committed to signing an Additional Protocol-which allows more intrusive IAEA inspections-of its civilian facilities.
  • India agreed to continue its moratorium on nuclear weapons testing.
  • India committed to strengthening the security of its nuclear arsenals.
  • India worked toward negotiating a Fissile Material Cutoff Treaty (FMCT) with the United States banning the production of fissile material for weapons purposes. India agreed to prevent the spread of enrichment and reprocessing technologies to states that don’t possess them and to support international nonproliferation efforts.
  • U.S. companies will be allowed to build nuclear reactors in India and provide nuclear fuel for its civilian energy program. (An approval by the Nuclear Suppliers Group lifting the ban on India has also cleared the way for other countries to make nuclear fuel and technology sales to India.)

In return for this deal, India would be eligible to buy U.S. dual-use nuclear technology, including materials and equipment that could be used to enrich uranium or reprocess plutonium, potentially creating the material for nuclear bombs. It would also receive imported fuel for its nuclear reactors.

However, the deal encountered stiff resistance from the very first day. Leaving aside the countries like Pakistan and China who would be severely affected by this deal, the whole world was against this deal from the moment it was signed. Critics call the terms of the agreement overly beneficial for India and lacking sufficient safeguards to prevent New Delhi from continuing to produce nuclear weapons. While India has pledged that any U.S. assistance to its civilian nuclear energy program will not benefit its nuclear weapons program, experts say India could use the imported nuclear fuel to feed its civilian energy program while diverting its own nuclear fuel to weapons production. New Delhi has done similar things in the past; India claimed it was using nuclear technology for civilian purposes right up until its first nuclear weapons test in 1974.

According to some experts, China’s rise in the region prompted the United States to seek a strategic relationship with India. Simply stated, the deal was meant to counterbalance China. But the assessed motive for India to sign this deal keeping China’s rise in view is not endorsed by all the experts because growing economic relationship between China and India is so critical to New Delhi that its interests in China cannot be threatened or replaced by any agreement with the United States. On the other hand, the U.S. nuclear aid to India could foster a dangerous nuclear rivalry between India and China. Though India has a strong interest in building economic relations with China, New Delhi is still wary of China’s military rise in the region.

Pakistan has not received a similar deal on nuclear energy from Washington. Some experts say this apparent U.S. favoritism toward India could increase the nuclear rivalry between the intensely competitive nations, and potentially raise tensions in the already dangerous region. Experts were worried this will feed the Indian nuclear weapons program and therefore weaken deterrence and both countries admittedly now nuclear, could be forced to deal more cautiously with each other. Some experts were concerned about further cementing of Sino-Pakistan ties  as the U.S.-India deal could prompt Pakistan to go elsewhere for similar terms.

The landmark agreement was supposed to allow the sale of nuclear reactors and fuel to India, even though the country has nuclear weapons but has not signed the Non-Proliferation Treaty. Advocates of the deal said it would bring tens of billions of dollars in business to the United States and create thousands of jobs, while also cementing a new partnership between the two nations to counter China’s rise. According to Washington Post, the deal, symbolic of the new alliance, is not in any political danger. But U.S. companies have not sold any reactors or equipment to India. American nuclear-fuel firms, which face no legal or policy hurdles, also have not begun selling to India.

According to an article in Foreign Policy, the U.S.-India Civil Nuclear Agreement hasn’t met U.S. commercial expectations due to the nuclear liability law passed by the Indian Parliament, which essentially shuts out U.S. companies. This law would make suppliers of nuclear equipment liable for massive claims in the event of a nuclear accident during the reactor’s lifetime. That raises the risk of doing business in India to levels that U.S. private-sector companies and their insurers cannot accept but that state-backed companies in Russia and France, with the much deeper pockets of their respective governments, might be able to live with. And it puts India far out of step with other countries, which hold plant operators solely liable. Of the $150 billion jackpot that was supposed to be in play, U.S. firms have not yet earned a dime, in spite of very hectic diplomatic activity at the highest level of the US. But France’s Areva and Russia’s Rosatom have been doing a very profitable business in India — thanks to the doors opened by the U.S. government’s 2008 deal. Areva has already signed a $9.3 billion preliminary agreement to build two reactors, the first of six that are planned. The deal could eventually be worth about $20 billion to the French company.

The nonproliferation lobby in the United States and elsewhere has never been comfortable with the deal, which gives India access to sensitive technology and allows it to buy nuclear fuel on the international market without binding it to the rigorous safeguards and restrictions of the NPT. Under the terms of the deal, India has agreed to open all of its civil nuclear facilities to inspection by the International Atomic Energy Agency — which proponents say is an important step forward — but India’s military nuclear facilities remain closed to IAEA inspection.

In effect, the nuclear deal stands indicating a broader problem in the U.S.-India relationship. President Obama has wooed India assiduously, even supporting its bid for a permanent seat on the United Nations Security Council. But there was enormous disappointment in Washington when India did not shortlist any U.S. companies when deciding on a major overhaul of its fleet of fighter planes this year, a deal worth billions of dollars that could have heralded a new era of defense cooperation.

In addition to India’s law shutting doors on US corporate sector without saying so, there are other hurdles, too. New Delhi has not given an assurance to Washington that Indian private companies will not re-transfer American nuclear technology and information to others, a requirement under U.S. law. And before India can buy American and French reactors, New Delhi has to sign a nuclear cooperation deal with Japan. Those reactors use Japanese parts and technology, which cannot be supplied until Japan changes its law to allow nuclear trade with India.

3 thoughts on “American investment in Indo-US nuclear deal goes down the drain….

  1. The Americans, greedy as usual, wanted to sleep with India on the first date. India, however is clearly not oblivious of a nuke deal, that came laden with a number of poison-pill amendments, aimed at curtailing India’s strategic autonomy, and bringing India into the NPT through the back door. The Americans should have realized by now that, Just as the American Congressmen, India also has its own right to pass legislation to guard its own interests. Therefore there is hardly any surprise that the deal has nothing to show for in the past five years since it was signed …. !

    Secondly, by opening a partnership with India, the US has made sure India will not join the Chinese side in any conflict in the future. Is not that something that would run into hundreds of billions of dollar value in terms of military implications ….. ?

    1. According to this article, which by the way is true, that the whole world was against this US-India nuke deal. By the same logic, that the deal has not produced any results after over five years, should be seen as a positive development by those experts against the deal.

    2. Pakistan is the major non-NATO ally of the Americans, and the recipient of generous economic and military aid that runs into tens of billions of dollars. These are a direct threat to India’s security. Therefore the China-Pakistan angle, in the backdrop of the US-India deal does not make much sense.

    3. While India did not shortlist American companies for the Jet Fighter deal, it awarded contracts of over $ 10 billion dollars to the American companies for other defence equipment. This is unprecedented, considering the history of past four decades of American sanctions and nuclear aprthied against India.

    Bottom line, the US-India nuke deal and the associated strategic implications, is meant for the long term, with an eye on China fifty years down the road. However India will not fight America’s war in Asia, India will only fight its own war ……… !


Comments are closed.