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  What If India-US Nuclear Deal Fails  


By: Hari Sud
April 28, 2007
iews expressed here are author’s own and not of this website. Full disclaimer is at the bottom.


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If the India – US Nuclear deal fails, that is a bad news for Indian Industry and Agriculture. This deal was in the making for years, except that the Manmohan Singh’s government seized the initiative. Initial euphoria of Bush-Manmohan agreement of 2005 evaporated as the US Nuclear lobby, got into high gear. This lobby got its massive support from ex Clinton Administration officials and few left over stalwarts of Jimmy Carter Administration officials, who had drafted the NPT Treaty and its offshoot NSG. Both these previous Administrations had made NPT and NSG as center stage of their nuclear foreign policy. All in all, NPT/NSG is a bad set of rules basically designed to punish India and deny it high tech hardware? In seventies India was economically weak (so was China except China had UN Security Council veto in its pocket) and could be pushed around. Never did the authors of the treaty ever think that times may change, India may come from behind and achieve a phenomenal economic success. Then it will be foolhardy to deny a nation of 1.1 Billion and a Trillion dollar economy (expected in 2008-09) important aspects of technology. With forgoing in mind, Bush and Manmohan decided to remedy the imbalance and accept India as partner in nuclear energy development. The same was not acceptable to the US nuclear lobby that worked hard to derail the Indo-US Nuclear agreement. Finally whatever was passed, as Henry Hyde Act in 2006 by the US Congress was a bit deviation from 2005 understanding? Later, India thought that the final operating rules and regulations (123 Agreement) would circumvent whatever was left a bit awkward in the Henry Hyde Act. It seems that negotiating 123 rules changes is as difficult as getting the Henry Hyde Act passed thru the Congress. Nuclear lobby may finally achieve its objective i.e. it may derail the Indo-US Nuclear deal.

The Sticking Points
India does not wish to completely forgo right to conduct nuclear tests if the provocation to its security are too great or would never give up technology development on Fast Breeder Reactors nor will it stop processing spent fuel. The Bush-Manmohan agreement was innocuous sort of deal of two heads of government, which realized each other’s importance in strategic terms, struck this deal. India needs US for continued economic progress. US need India to get the best out of India’s brainpower for cheap IT, BPO and KPO services. Also India is the only ally US has in the Indian Ocean Littoral States, which will ensure open sea lanes from Suez to Singapore and keep Pakistan and its Mullahs in check. This sort of understanding of each other’s position should be sufficient to facilitate each other’s interest. Then why was the US Lobby allowed to raise objections and get its way (partially) during the passage of Henry Hyde Act? Part of the reason is a politically weakened President Bush with lack of success in Iraq. When the Henry Hyde act was passed, he was fighting for his party’s political survival in the Congressional Elections. Opposition took note of it and extracted a pound of flesh with the Act not clearly saying that India is welcomed in the nuclear fraternity. Hence, today’s discussions on 123 rule changes is taking long and may even become fruitless. India may walk out of the deal and economies on both sides may suffer.

What Does India do to Offset Failed Indo-US Nuclear Agreement?
By the end of this year if 123 Agreement is not concluded satisfactorily, India will be left with little choice but to quietly forgo the nuclear deal. Indications are already beginning to emerge. First, Nicholas Burn’s (US State Department Official) statement after he met with his Indian counterpart recently that the US has done, whatever it could do for the deal, now it is Indian turn. He was highlighting US’s inability to move around the above-mentioned sticking point in the Henry Hyde Act. Second, India developed a renewed interest in gas from Iran, after putting it on back burner for a year. Third, a row over procurement of banned hardware by India in US is putting strain on negotiations. US cannot play hardball on this. They have been accused of spying in high a places like Prime Minister’s Office.

India has meager natural resources of its own to generate Power. Almost all the hydropower, barring a few in J&K, Himachal Pradesh and Uttaranchal Pradesh has been tapped. India does not have in-exhaustible Coal supply. Moreover excessive Coal burning has a detrimental impact on the environment. Natural gas discoveries in the Arabian Sea and Bay of Bengal are not large enough to satisfy the growing needs. Hence India is left with two alternatives nuclear power or gas from Middle East. The latter could come easily via pipeline thru Pakistan or with difficulty as liquefied gas in tankers.

Current state of power generation in India is bleak. There is overall 12% power shortage in the country. In some areas shortages are much higher. Central and state governments generate bulk of the power 58% and 32% respectively. Private sector generates a meager 10% of the total power. Most of the power is generated using coal (60%). Hydro accounts for 26%, gas accounts for 10% and nuclear accounts for 3% of power generated. Remaining 1% is generated using a mix of diesel and fuel oil.

As the economy grows at 8-9% a year for the next 15 years, power generation will have to fill up the previous gap plus grow at a rate of about 10% per year. That means, unless power generation capacity boosts up well above 10-12% a year, Indian industry and agriculture will find difficult to maintain the momentum it has created in last 5 years.

Hence nuclear or gas has to come to the rescue. Today, gas to India will find a difficult going. First, US are totally and completely opposed to it. Second, using hostile Pakistani territory with high transit fees makes it totally uneconomical. Also, unhappy US could forbid its companies and European subsidiaries to bid on gas pipeline contracts. It may deny monetary support, which will make implementation of this project impossible. In addition, Pakistan will collect huge sums of money (as much as $500 million a year) in transit fees. These amounts are sufficient to arm Pakistan with newer weapons.

Current nuclear installed capacity in India is 3,000 Mega Watts. By 2030, this has to be boosted to about 30,000 Mega Watts. Hence, in next 20 years about 27 nuclear generation units, each with 1,000 Mega Watt capacities will have to be built at a cost of $100 Billion. This is a huge business, which any country would wish to have. US are first in the line. In addition, countries like Australia, Canada and US will also benefit immensely with Uranium exports. India has no Uranium of its own. Most of it will be imported. Hence, it is difficult to understand why US Administration and politicians are being stingy in finalizing the deal.

Alternative to gas & nuclear is coal. Rough estimates are that to generate that much power using domestic and imported coal, an additional 130 million tons of carbon dioxide will enter the atmosphere. That will bring catastrophic change to the environment and hasten end of the planet earth. Hence, nuclear deal is not only important to India but also to the rest of the world.

Let us hope that US & Indian politicians and officials cool off the rhetoric and begin a serious task of circumventing a few misunderstanding in the Henry Hyde Act. If it requires that a supplementary law be enacted by the US, which removes all the misgivings in the aforementioned Act, so be it.

Hari Sud

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