What is the purpose of 123?
The Prime Minister, in his Parliament statement last August, said the purpose of the 123 Agreement (123) was “the complete and irreversible removal of existing restrictions imposed on India through iniquitous restrictive trading regimes over the years (and)… the removal of restrictions on all aspects of cooperation and technology transfers pertaining to civil nuclear energy”. More plainly, India wanted access to international uranium and increased technological co-operation, with perhaps a view to being recognized as a nuclear power similar to the US, the UK, France, Russia and China.
India needs uranium to burn less coal as it continues on a high-growth path. Currently, India does not have enough domestic uranium supplies, though some would argue that this is because it has not invested enough in mining and the problem is short-term. India does have a lot of thorium, but these alternative nuclear technologies are not yet operational.
To meet the concerns of the Nuclear Suppliers’ Group (NSG), which is concerned about non-proliferation, especially since India has not signed the Non-Proliferation Treaty (NPT), India agreed to classify its nuclear facilities into two types, viz., (a) unsafeguarded, i.e., where it did what it wanted with domestic uranium, and (b) safeguarded, where imported uranium would be used for civilian nuclear energy. A special set of India-specific safeguards, negotiated with the International Atomic Energy Agency (IAEA), a UN body, would ensure that imported uranium was not diverted for military use. This is the so-called Separation Plan. Since India’s use of domestic uranium could not anyway be restricted, this was seen as a balance between the benefits of nuclear energy in emission reduction and the risks of increasing India’s military capability.
But if it is in the interest of the US and others in the NSG to reduce our emissions, should they not actually subsidize this shift, e.g., through the Clean Development Mechanism (CDM), where currently nuclear energy does not figure? Could the threat of India continuing with coal have got it access to nuclear energy on better terms than 123 and the Hyde Act?
What is the Hyde Act and how important is it?
To engage with India, the US, a leading member of the NSG, had to overcome prohibitions in its own Atomic Energy Act of 1954 (AEA), preventing cooperation with nations that have not signed the NPT. The Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006 (Hyde Act) is a specific waiver of this ban in the AEA, and permits the US President to enter into a nuclear cooperation agreement with India, under Section 123 of the AEA, whence the name.
The Hyde Act does ask the US President to persuade India to accept many conditions, but they do not apply directly to India. To make them apply, India has to accept the conditions through a treaty, such as 123, which, at the moment, doesn’t impose them. A spate of articles has interpreted various clauses of 123 in the light of the Hyde Act, but such interpretations are incomplete.
In interpreting 123, India should be guided by its interests. If a common interpretation cannot be agreed upon, 123 can be terminated and we need to examine the consequences thereof. But, surely, it is an alarming lack of confidence not just in this but also in future Indian governments if we believe they would allow 123 to be interpreted solely to meet the requirements of the Hyde Act. If a day were to come when the government of that day is really so inclined, it would hardly need the pretext of 123 to justify such subversive behaviour. Neither is it important to verify whether 123 meets the requirements of the Hyde Act. That is for the US Congress to decide.
Ordinarily, under international law, a nation cannot invoke a domestic law as an excuse to wriggle out of treaty obligations. Thus, for India, the operative document is the final 123 and not the Hyde Act itself, except insofar as the performance obligations of the US are limited by 123’s statement that both parties “shall implement this agreement in accordance with its respective… national laws”. Thus, it is important to understand what India is committing to do under 123 and what sunk costs will be borne in implementing it. We must also recognize that the US may, regardless of any text in 123 to the contrary, not carry out its part in the agreement, as it did in Tarapore, and as it has recently done in other instances. The Hyde Act increases the possibility of such termination and we need to insure ourselves against such an event.
What if 123 is terminated?
Either party can terminate the agreement with a year’s notice. Such a termination is most likely if India “detonates a nuclear explosive device”, since it makes the Hyde Act waiver of AEA, which permits 123, ineffective, though other as-yet unspecified reasons can also lead to termination. This need not shut our nuclear energy plants since provisions in 123 bind the US to make best efforts to secure fuel supplies from alternative sources. However, this is not iron-clad supply insurance. Furthermore, even if the agreement with the NSG, which is to be negotiated in the future, does not have any such restrictions, the risk remains that the NSG, too, may not honour its pledges.
But India can insure itself by securing all the fuel upfront! The text of 123 itself allows the transfer of “fuel consistent with the efficient and continuous operation of reactors for their lifetime”. Though some argue that it is not a specific permission to accumulate fuel reserves, the Prime Minister’s interpretation is that India has the “right to build up strategic reserves of nuclear fuel to meet the lifetime requirements of India’s reactors”. To support this view, 123 has elaborate provisions on safeguarded fuel storage. Also, it can be argued that India has agreed to place the safeguarded nuclear facilities under perpetual India-specific IAEA safeguards, even if 123 is terminated, because it expects the facilities to function for their designed lifetime.
Such a lifetime stockpile is compatible with the letter of the Hyde Act, which allows for reserves, “commensurate with reasonable reactor operating requirements”. But the Joint Explanatory Statement of the Committee of Conference related to the Act states that the US Congress did not intend this provision “to help India to build a stockpile of nuclear fuel for the purpose of riding out any sanctions”. If so, the current 123 version may be modified by Congress when it is sent for ratification, since, unlike the Indian government, the US government’s treaty-making powers are not unfettered. If that happens, India then should reject the modified 123. A lifetime stockpile would thus seem a necessary precaution if India is to insure itself against fuel supply disruption. Indeed,if it contracts to purchase nuclear energy from private producers, physical possession of lifetime fuel should form part of thecontract.
Finally, 123 also enables the US to ask for the return of equipment procured under it. However, India is entitled to ask for “fair market value thereof” and, more importantly, “for the costs incurred as a consequence of such removal”. If this phrase is interpreted as the loss in output caused by the reduction in energy supply from closing the nuclear facilities, it could run into hundreds of billions of dollars. Thus, while 123 allows the US a “right of return”, its application may be expensive for the US making its exercise unlikely.
What about technical cooperation?
So much for nuclear energy. What about increased technical cooperation? This has not been achieved in full measure, though prospects are looking up. 123 limits cooperation to “aspects of the associated nuclear fuel cycle”. For the moment, there will be no technology transfer in nuclear reprocessing, enrichment and use of heavy water, and dual-use items in these areas will be subject to restrictions. This does not prevent India from using technologies it currently possesses for these purposes, but 123 does not measure up to the goal of removing restrictions on “all aspects of a complete nuclear fuel cycle” including “reprocessing spent fuel”. While 123 does provide for a new IAEA safeguarded reprocessing facility for imported uranium, the details on that are fuzzy and remain to be negotiated. The route to nuclear power status seems longer and harder than the one to nuclear energy. Understandable, since US does not share such technologies even with the UK. If one expects easier treatment from other countries, it is good to remember that piggybacking has never been a good way to learn walking.
Regardless of this caveat, 123 may make available a number of other technologies to India that it is currently denied. It may well turn out that such access will be among the key benefits from 123, but this case remains to be made.
In sum, India seems to have a workable deal on nuclear energy, but a prudent government should stock up on fuel for the lifetime of each facility. Besides, if India uses foreign firms to expand its nuclear energy facilities rapidly, some agreement such as 123 would be needed to permit them to establish facilities in India. However, on nuclear and other technology, though cooperation is likely to increase, some key areas remain out of bounds. Thus, while it may be oversold, the text of 123 does not appear onerous.
Text, context and subtext
If the problem is not with the text of 123, is it with the context or subtext? Are the concerns about how 123 might affect regional relations and India’s policy of universal disarmament? Or are they about the motives of the US government? It cannot be to sell nuclear reactors, because the ones it has to offer are untested, as compared with the European and Russian alternatives on offer. So, is 123 the price that the US has agreed to pay so that we buy conventional weapons systems from them rather than our current suppliers, so that we align our foreign policies on issues such as Iran and China and participate in initiatives such as the missile shield? This is a vastly larger incentive for the US than the few tens of billions of dollars that will be spent on nuclear reactors. Such a shift, and not just 123, would truly be a new strategic relationship, but would it be advantageous to India, especially when US policy appears increasingly ineffectual?
In and of itself, however, 123 does not bind us to this course of action. Indeed, post-123, we can buy our reactors from the Europeans, our uranium from the Australians and our weapons from the Russians and high-technology, high-value items from the Americans, if they are willing sell them to us. Will we be able to make such decisions independently or will we feel obliged to succumb to US pressure? The answer will determine whether we are truly a nuclear power or just a consumer of nuclear energy. These are the kind of answers we should seek from the government in terms of its past decisions and future strategy. 123 has little to do with such answers. Only one thing is certain: They won’t be as easy as 1-2-3.
Partha Mukhopadhyay is senior fellow at the Centre for Policy Research, New Delhi. Comment at firstname.lastname@example.org