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  Indo – US Nuclear Deal, Plan B if the Deal Fails  


By: Hari Sud
May 04, 2006
iews expressed here are author’s own and not of this website. Full disclaimer is at the bottom.


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In the Week of March 17th, US Senator Richard Lugar placed a bill in the US Senate to amend the Atomic Energy Act to let the Indo-US Nuclear deal become the law and Representative Hyde placed the same bill in the House of Representatives for passage. Immediately thereafter the bill(s) ran into a firestorm of opposition, much of which was the work of the US Nuclear Lobby Group. India was hoping for a quick passage of the bill. Opposition was determined to stall it. No amount of lobbying by India and appearance before the Senate’s Foreign Relations Committee by the US negotiators of the deal including Condi Rice changed the mind of the hardliners in the US Senate and in the Congress. Last appearance by Condi Rice at this committee did not change any minds. Hence the deal is stuck at the US Congress. With his low ratings at the polls, President Bush did not wish to use all his remaining political capital to push the Indo-US deal. Hence it is now obvious that passage of this bill has been postponed to the next year. A new Congress, after November 2006 elections, will vote on this deal.

Does that mean that the above bill's on the US Congress floor are dead?

Not yet, but pretty close. Passage of the above deal with new elected officials is uncertain. It may still happen, but for India; a Plan B has to be put in place in case US Congress does not sanction this deal.

What can be the Plan B?

Most Indians Wish to Know – What is the Plan, if the above Deal Fails

There is no published Plan B, should the Indo-US Nuclear deal fail to clear the US Congress. This deal would have circumvented the arduous passage of a gas pipeline via Pakistan and over the insurgency infected Bulochistan area. In addition India’s commercial and military ties with US would have blossomed. FDI monies would have arrived in India in a big way. India would have become bulwark of counter balance to now a very aggressive China. The earlier plan of cheap gas from Iran or Central Asia had to be put on the back burner. Each would have given Pakistan an iron clad strangle hold over India’s economy. If the deal were approved then this would have given India a bit of flexibility to negotiate with Iran for price and with Pakistan for passage.

For US the deal is a win-win situation. With its approval, the dormant nuclear industry would have come back to life. Boeing Industries would be a big winner in terms of additional orders for commercial and military jets. Merchandise trade between US and India, which today is at about $40 Billions would have doubled in four years. US businesses would reap greater rewards from cheap but first class IT, BPO and KPO services provided.

Additional environmental benefits with reduced greenhouse gases emissions, should India produce part of its electricity with eight giant size nuclear plants, is immense. Pressure on world crude oil prices will be lessened with lower demand by India. All these are indirect benefits. These are to be duly considered when the US Congress accepts or rejects this deal.

Choices Before India

Energy needs of India are acute. The matter has already started to hit harder with Crude Oil prices touching $75 a barrel. About $40-45 Billions of import this year’s import bill of $145 Billion is Crude Oil. It will be rising steeply by 2010. Hence, the nuclear option looked very attractive. Its only dependency is supply of Uranium and technology (at this moment another dependency has emerged i.e. US Congress approval). With uncertainty rising, all other options are to be revisited.

India, toady generates about 130,000MW of power from a mix of sources including Coal, Hydro, Natural Gas, Nuclear and renewable sources. The supply is about 10 to 12% short of demand. The demand will double in eight years, so will the shortage. Hence all available energy sources will have to be reconsidered. The equation has to include possible failure of Indo-US Nuclear deal.

• Coal as source of Energy

India has roughly 200 Billion tones of coal reserves, of which about half is recoverable. India mined about 360 million tones of coking and non-coking coal in 2005. About 66% of India’s power generation is thermal based. Of which burning coal generates 70 to 80%. Remaining coal production goes to metallurgy, Industrial and household uses. Coal consumption in thermal power plants is expected to double in ten years. That means that greenhouse gases production will also double. Global warming will be adversely impacted, so will smog and pollution in cities with added coal usage.

India has on its card seven very large thermal power plants (4,000MW capacity) with coal as basis under various stages of planning. Half of these are planned for coastal areas, where imported coal (Australia as source) will be used. Others are planned as pithead plants, where power plants are located closer to the mines to reduce shipping expenses. If the Indo-US deal fails coal may become the only source of energy other than imported crude oil. Global warming may have to take a back seat in this environment.

• Hydro-Electric Power

About a quarter of India’s power needs are satisfied with hydroelectric power. These power plants are hydro cum irrigation projects. By year 2002, almost all the rivers in India, which would permit construction of a dam, have been dammed. A few of these are partially complete others are in the planning stage. These power plants have a limitation. They need perennial rivers and topography, where falling water could be used to generate electricity. With limits on how much hydropower could be generated, attention immediately turns to other sources. There is a great advantage of these projects. These are non-pollutant, and ensure rural prosperity with water supply to the cultivable land. In last few decades high water table has emerged as a threat. But this threat can be contained.

Hydropower is no alternative to industrial needs of power. At times hydropower location and transmission costs make it unprofitable.

• Natural gas

Natural gas in last forty years in the industrialized world has provided about 15% of power. Canada, US and recipients of North Sea as well as Russian gas have generated power using Natural Gas. It is the least of the pollutants of all the fossil fuel. Its supply is abundant, but its usage is limited to places where large underground reserves exist. In last 30 years, this gas has been piped to hundreds and thousands miles to the consumers. Russians pipe gas 3,000 miles to the Western Europe. Canada pipes gas two thousand miles from Alberta fields to the East Coast. The same is true about US, where gas pipelines crisscross the whole country. A proposal to pipe gas from Iran to India over 1,500 miles exists. Similarly a proposal to pipe gas from Central Asia to India exists. This limitless supply can meet demand for more than one hundred years.

India, until the Indo-US nuclear deal was signed, was dead serious to meet its energy needs with Iranian gas. The above nuclear deal, took the shine off this proposal. Although not completely abandoned, yet this proposal in contingent on the early approval of the nuclear deal by the US Congress.

• Wind, Solar, Hydrogen as sources of energy

All these energy sources on paper appear very good, except these are hard to implement for mega power generations. In Denmark, local supply of power for a few towns has been met using wind power. In California, experiments on using solar power are ongoing for the last 20 years. The Hydrogen power for automobiles is a joke. But it is an answer of some of the petroleum companies in North America, who have been accused of not doing enough for replacing dependency on imported oil. Hydrogen fuel for autos will require a huge amount of nuclear energy to split water into Hydrogen and Oxygen and then very expensive storage and delivery system. In India the forgoing is a non-starters.

• Nuclear Energy

Nuclear energy stands at level with coal and natural gas as a long-range solution for satisfying everybody’s energy needs. With crude oil at $75 a barrel, it appears economical to build nuclear power plants. Although US has not approved a new nuclear power plant for construction for the last 35 years on account of safety concerns. This resistance is bearing thin. US will approve a proposal to build a large nuclear power plant with additional safety features in next two to three years. It will be good for this industry.

For India, this seemed to be the only alternative. As stated above its development is also of great strategic value. It will deepen India’s relationship with the West. The question is whether India asks the West to supply technology and monies to build these power plants or build it itself. The latter technology is at an infancy stage. Most of India’s nuclear power plants, which generate electricity, are of American or Russian design. India’s own design is a few decades away. That is why India generates only 2.5% of its electricity using nuclear energy. Compare to that US generates 21% and France 79% of its electricity using nuclear energy. The Western technology will not come to India, until a few ironclad guarantees are ironed out. All these have been provided in the Indo-US Nuclear deal. Still the deal is a hostage to negative lobbying by a group of very powerful politicians in the US. Its passage is up in the air.

Chanakya Option

India needs this deal. India has to have it by any means. Chyanakya as he theorized twenty three hundred years back, asked the king to tackle opposition head on and prevail. He was quite lenient on the issue of temporary loss of prestige. He implemented his theory by making up with King Nanda of Magada, temporarily to grab the power and then dismissing him when the time was right. In this way he united all of India under one flag.

In my opinion, India needs to grab all the nuclear technology; money and engineering insight from whatever sources it can get and wait until relevance of these stricter controls is unnecessary. The latter may happen soon. Iran is about to master nuclear technology. North Korea is right behind. Pakistan acquired it by hook or by crook, 20 years back. Soon anybody who wishes and have money will acquire it. Then relevance of stricter controls will be gone. The forgoing may not happen in next 30 years, but India needs that much time to economically develop itself and catch up with the West. Controls 30 years hence in the present environment are irrelevant.

What is the US Congress Asking for now?

What the current US Congress may ask on top of what has been already been agreed in the Indo-US Nuclear deal is irrelevant now. The Republicans who control both houses of US Congress today may loose one or both houses in coming November elections. The make up of both the houses will be a bit different come next year. Although some of the stalwarts of both US political parties may return in the elections, it is uncertain whether they will be in control. US public is in a punitive mood. They do not like the Iraq war and may decide to hand down President Bush a Congressional defeat. Usually when the forgoing happens, the President becomes a lame duck. Legislative initiative then shifts to the Congress. They may approve a deal with conditions not palatable to India. A rumbling in both US Houses is being heard on applying new conditions before the vote. These include cap on nuclear testing and quantifying credible nuclear deterrence. These modifications to the original agreement are always hard to swallow. Americans know that and may find no listeners on Indian side unless they offer something in return e.g. a nuclear testing cap may be mutual and credible deterrence weapons instead of being tested in the field may be tested by simulating in the laboratory. US have that technology.


In my view, Iran-India pipeline is to be built together with the construction of nuclear power plants. It will ensure flexibility. Coal should continue to be main source of energy but its increased usage should be severely curtailed in light of global warming menace. US Congress’s reluctance to approve or attach new conditions to the Indo-US deal has to be opposed. Only possible scenario, which may allow acceptance of cap on nuclear testing by India include a mutual cap in which if US resume testing then India could do the same. US Congress will find it hard to reject this scenario. In addition US will offer help to simulate nuclear testing in the laboratory to keep India’s arsenal in tip top shape, should any of India’s neighbor decide in nuclear blackmail.

Hari Sud

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