Clinton’s Nuclear Bargain With India

If a “strategic partnership” is here, can business pacts be far behind? US Secretary of State Hillary Clinton left no doubt about the close nexus between the two during her recent visit to New Delhi while answering fresh questions raised over the famous US-India nuclear deal.

The main question arose from a decision of the 46-nation Nuclear Suppliers' Group (NSG) that seemed to deny a special concession India had won from the Vienna-based forum on the eve of the deal, as an essential condition for its conclusion. Clinton had a comforting reassurance to offer in this regard. This was combined, however, with her public pleading for US corporations demanding protection from the costs of disasters that the deal and consequent nuclear commerce can spell for this developing nation.

On June 24, the NSG was reported to have adopted “new guidelines” on the transfer of “sensitive” nuclear technology. In September 2008, the anti-proliferation group, founded in the wake of India's nuclear test in 1974 (unconvincingly named a “peaceful nuclear explosion” or PNE), primarily under pressure from the US and former President George W. Bush in person, extended a “clean waiver” of earlier conditions for nuclear commerce. The new guidelines were seen as nullifying the waiver.

The most important condition waived three years ago was subscription to the nuclear Non-Proliferation Treaty (NPT), which India has steadfastly refused to sign. It was also made clear that India would have no problem importing enrichment and reprocessing (ENR) equipment and technology, important in non-peaceful nuclear programs, from any member of the cartel. The NSG has now decided to “strengthen the guidelines,” specifically mentioning NPT membership as a criteria for a recipient country to meet. A particularly shrill howl of protest in India greeted the reported resolve to tighten provisions for export of ENR items.

Clinton's statement on the subject makes one wonder if there was more to the NSG's apparent rethink than met the eye. Was the hand of Washington, which pushed India's case hard and prevailed over the rest of the NSG in 2008, behind the seeming bid to resurrect the waiver? The secretary of state did allay apprehensions in India about the US restoring pre-waiver criteria for nuclear commerce with India. But she also spelt out a new condition and did so on behalf of US nuclear corporations.

Answering a media query, she asserted that the US was fully committed to the waiver and to full civilian cooperation with India in terms of the deal. She, however, asked New Delhi to reciprocate the gesture and reconsider the nuclear liability law passed in India's Parliament in August 2010. She asked India to ratify a global treaty on nuclear damages, the Convention on Supplementary Compensation (CSC), by year-end. India signed the CSC in November 2010 and is committed to ratifying it. But Clinton connected this to India's compliance with “international standards” in the matter.

Clinton said: “We are committed to it [the deal]. But we do expect it to be enforceable and actionable in all regards.” She added: “We would encourage engagement with the International Atomic Energy Agency (IAEA) to ensure that the liability regime that India adopts by law fully conforms to the international requirements under the convention.”

From its drafting stage, the law met with considerable disapproval from the US nuclear industry. Successive US ambassadors in India have labored to stress the need for a “level playing field” for a declining industry that saw deliverance in the deal. They have argued that liability laws imposing heavy damages in case of nuclear accidents on suppliers of nuclear equipment, materials and services will put US firms at a considerable disadvantage in comparison to state-owned companies, as those of Russia and France, in the nuclear industry.

The parliamentary debate over the issue, however, raged amid a growing, nationwide clamor against a law that would placate the supplier and penalize the operator alone. Opponents of such a law pointed out that it would be absurd and utterly unjust in India's context. The lone operator of the large number of nuclear reactors, planned to be imported, will remain the state-owned Nuclear Power Corporation of India Limited (NPCIL). This means that, under the law of the kind the US has pressed for, it is India's taxpayers who will pay for any nuclear calamity.

The strident campaign for a law that won't spare the supplier drew strength from bitter memories of the Bhopal tragedy as well. The “Hiroshima of chemical industry,” which struck a city in India's heartland in 1984, has taken a toll of tens of thousands of lives over the years. The survivors, however, have yet to receive a fraction of the compensation and relief from two US corporations – the Union Carbide that presided over the disaster and the Dow Chemical that has disowned all liability in the matter as the UC's successor. Even the staunchest backers of the “strategic partnership” could not scoff at the call to avert nuclear Bhopals.

The law, as passed eventually, made two departures from the CSC provisions. First, it allowed an operator a right of legal recourse against a supplier, if an accident was caused by the latter's negligence in any way. It also allowed affected common citizens to seek damages under other laws in force in the country.

The enactment has proven a dampener to two US companies – GE and Westinghouse – which were waxing enthusiastic about nuclear collaboration with India not long ago. In January 2009, the Mumbai-based Indian conglomerate Larsen & Toubro (L&T) and the US-based Westinghouse Electric Company signed a memorandum of understanding for “cooperation to effectively address the projected need in India for pressurized water nuclear reactors with modular construction technology.” The memorandum of understanding also envisions “turnkey construction of nuclear power plants including supply of reactor equipment and systems, valves, electrical and instrumentation products and fabrication of structural, piping and equipment modules for the Westinghouse AP1000 plants.” In June 2009, it was reported, Kaiga, in the southern state of Karnataka, already the site of four indigenous nuclear reactors, was being “pushed hard” as the location for new US-built reactors.

In late May of the same year, L&T and US-based GE Hitachi Nuclear Energy signed a memorandum of understanding for cooperation on boiling water reactors and advanced boiling water reactors. Under the agreement, GE Hitachi and L&T were to plan for the construction and engineering management resources needed to build an advanced boiling water reactor power station, with GE Hitachi serving as the technology provider for certain equipment and components. Two months prior, GE Hitachi announced an advanced boiling water reactor development agreement with the NPCIL. GE Hitachi also said it was building its local supply chain in India and is exploring new business opportunities for civilian Indian nuclear power, including plant services and providing fuel for existing and new plants.

All this would have meant business opportunities worth over $50 billion for the corporations, the highest ever for the two companies outside their home country. Activists pleading for the people's safety, alas, have played the spoilsport.

Clinton has put New Delhi and India's nuclear establishment in a mild predicament. Politically, it will be next to impossible for them to try and tinker with the law enacted in the teeth of countrywide opposition to any compromise with the US corporations. They have not, however, lost all hope. The “strategic partnership” is made of sterner stuff than that.

Mandarins charged with managing the situation are said to have suggested finding a solution, far from the madding political crowd, through “commercial talks” between the companies and the NCPIL that would run the plants. The talks, they hope, will ensure competitive terms and conditions for the companies, without the governments of the two countries coming into the picture and getting into any controversy.

It remains to be seen whether they will succeed in such cynical circumvention of the law. We must also wait to see if they can do so behind the backs of the billion-plus people of India.