India-US ties after the Westinghouse setback
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Nuclear energy powerhouse Westinghouse Electric Co. filed for Chapter 11 bankruptcy on 29 March, with its parent company Toshiba writing off more than $6 billion in losses connected to its US businesses. Westinghouse was engaged in negotiations to build six AP1000 nuclear reactors in India as part of the landmark US-India civilian nuclear agreement. The bankruptcy filing raises fresh questions, not just about the fate of the reactors, but also about the future of the nuclear deal.
Westinghouse has maintained that the Chapter 11 filing will not have an impact on its operations outside the US, especially in India. The company has indicated that it will continue with its plans to build nuclear reactors in India and not abandon the bids it has in place to do so. The US embassy in New Delhi has echoed this assertion.
While this may be cause for cautious optimism, it is worth recalling that spokespersons for Westinghouse had dismissed bankruptcy as a possibility just a few short weeks ago.
The reality is that Westinghouse and its Indian partner for the deal, the Nuclear Power Corporation of India Ltd. (NPCIL), are unlikely to meet the June 2017 deadline they established last year to conclude contractual agreements—a prerequisite to beginning construction on the reactors. This injects fresh uncertainty into an arrangement that was still in its nascent stages.
The company’s troubles are also likely to reignite debate within India over the wisdom of partnering with Westinghouse at all. Its record of delays and cost-overruns in building AP1000 reactors in other parts of the world has provided strong support to those who have called for India to find other nuclear suitors. The bankruptcy filing will make those arguments even more compelling. Ultimately, India’s plans to triple its nuclear power footprint by 2024 will proceed with or without Westinghouse, given the host of other firms it can engage towards this end.
The US-India civilian nuclear deal is a separate question. Unveiled in 2005, it lifted nuclear sanctions imposed on New Delhi following its first round of nuclear tests in 1974. Despite India’s refusal to sign the non-proliferation treaty, the accord recognized India as a global nuclear power and lifted restraints on nuclear commerce, paving the way for energy firms to compete for a share of India’s profitable energy market.
American business championed the controversial deal and helped secure congressional approval of the agreement, anticipating that companies like Westinghouse would secure lucrative contracts to build nuclear reactors in India worth billions. Given India’s voracious energy demand but limited energy supply, the agreement was framed as a win-win for all sides.
But a series of hurdles precluded the deal from ever being implemented. Chief among them was India’s onerous Civil Liability for Nuclear Damage Act enacted in 2010. Foreign firms refused to build any reactors in India until the legislation was revised, effectively rendering the deal inoperable. The Fukushima nuclear disaster in Japan created further complications.
The impasse persisted for more than five years. A breakthrough finally occurred during Prime Minister Narendra Modi’s 2016 trip to the US when he and then president Barack Obama announced that Westinghouse and NPCIL would work towards “finalizing contractual arrangements” for the project by June 2017. Completion of the proposed reactors would finally mark the consummation of the deal.
Many are now interpreting Westinghouse’s troubles as just the latest setback for an accord that has been plagued by delays and false starts for nearly a decade. The bankruptcy filing only further ensures that the commercial benefits of the agreement will remain unrealized. This is cause for serious concern. There is little doubt that the glow surrounding the agreement has dimmed considerably since it was first announced.
At the same time, however, the civilian nuclear deal has conferred immense benefits on the US-India relationship, the value of which cannot be measured in exclusively monetary terms. The agreement constituted one of the most significant diplomatic breakthroughs in the history of the bilateral relationship, heralding a new phase in US-India relations and setting them on an irreversibly upward trajectory.
The deal also helped establish unprecedented trust between the two countries, allowing them to overcome decades of historical estrangement. It was both the prerequisite and precursor to the exhaustive bilateral cooperation occurring between the states in virtually every arena today. The potency of the civilian nuclear deal in this regard will always far outweigh its commercial potential.
For its part, the US remains committed to civilian nuclear cooperation with India. Both sides should continue seeking the implementation of the agreement to achieve the full spectrum of benefits it has to offer.
But both sides should also resist the temptation to view the nuclear accord in transactional terms. This is true of the bilateral relationship more generally. To do so would obfuscate the full promise of the deal and undermine a strategic partnership whose foundation is predicated on a congruence of values and interests rather than on solely pecuniary and short-term gain. Sceptics of the agreement would do well to remember that the nuclear accord still retains considerable value even though Westinghouse has lost much of its own.
Ronak D. Desai is an affiliate at the Belfer Center at Harvard University and a fellow at New America.