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Is the India nuclear agreement really the ‘breakthrough’ Obama promised?
NEW DELHI — President Obama stood alongside India’s prime minister, Narendra Modi, in India’s capital just days ago and announced a “breakthrough understanding” that the two countries hoped would pave the way for U.S. firms to sell nuclear reactors to India.
But analysts and experts familiar with the negotiations say that the legal issues remain so complex that private U.S. companies may continue to shy away from new deals in India, despite the developing country’s dire and fast-growing power needs.
So far, the details of the agreements have been sketchy at best, although the Indian government was expected to release more details Thursday. On Wednesday, however, officials in India said that the agreement includes three key parts: the establishment of an insurance pool that will cover nuclear operators and suppliers for up to $250 million in damages; a nonbinding legal memorandum asserting that Indian liability law is consistent with international norms; and a new system of reporting on the status of nuclear fuel and other materials supplied by the United States.
“We’ve been characterizing it as a breakthrough or breakthrough understanding,” said a senior U.S. administration official on Tuesday. But, the official said, “It is not a signed piece of paper but a process that led us to a better understanding of how we might move forward.”
The talks around the Obama visit were designed to remove some stubborn obstacles to the sale of U.S. nuclear reactors and fuel to India, sales that had been cut off after India exploded a nuclear device in 1974 and tested nuclear weapons in 1998.
In the waning days of the presidency of George W. Bush, amid warming relations, the United States finalized a landmark civilian nuclear agreement with India. The deal was supposed to open a new era of cooperation between the countries after years of sanctions and create thousands of jobs for American workers.
But the new cooperation failed to materialize. In 2010, the Indian parliament passed a strict liability law that angered many in Washington and effectively stalled efforts by companies like Toshiba’s Westinghouse Electric and GE Hitachi Nuclear Energy to sell materials or partner to build nuclear power plants in India.
Aides say Modi and Obama — who met in Washington in October and again at the G-20 summit in Australia in November — wanted to move beyond the gridlock. Negotiators met formally in New Delhi, Vienna and London in the following months and were frantically trying to forge a deal even as Obama landed in the Indian capital on Jan. 25.
The talks focused on two key issues. The first was whether, in the event of some catastrophe, victims could sue in Indian courts and win unlimited sums, as permitted under India’s 2010 legislation. The other main concern hinged on coming up with a way of keeping track of U.S. nuclear fuel sold to India to make sure it doesn’t go to military use.
On the liability front, Indian officials said that they will create an insurance pool to cover $250 million in damages in the event of a major accident, and the government would cover an additional $200 million after that. The country is also planning to align itself with the Vienna Convention on Supplementary Compensation, which governs nuclear liability globally. Still, critics charge, those sums are nowhere near the $200 billion estimated from the Fukushima disaster in Japan.
Analysts say the real test will be whether the two American-Japanese companies now sign commercial contracts with the Nuclear Power Corporation of India. The Indian government has already slated sites for nuclear power facilities for Westinghouse Toshiba in the western state of Gujarat and GE Hitachi Nuclear Energy in the state of Andhra Pradesh.
“My feeling is that there’s not as much there,” said Daryl Kimball, executive director of the nonprofit Arms Control Association, a non-proliferation watchdog group. “The real test is, will GE or Westinghouse say ‘this is good enough for us’ or not and whether they will sign contracts.”
Jonathan Allen, a spokesman for GE Hitachi Nuclear Energy, issued a statement that said that they “look forward to reviewing the governmental agreement.”
The key issue will be whether the conflict between international law and Indian law can be waved away by a memorandum from India’s attorney general. The memorandum would have to say that the 2010 liability law “doesn’t mean what it says,” said a Washington lawyer familiar with the issues but who asked for anonymity to protect his professional relationships.
“The fear is that the U.S. government will say this is good enough,” the lawyer added. “Even if the [Indian] attorney general comes out with a memorandum saying the law doesn’t apply to suppliers, that’s not binding on Indian courts.”
The second obstacle has been the requirement in the Hyde Act of 2006 that the Indian government and an independent auditor annually provide information about the form, amounts and location of any uranium supplied to make sure it is not diverted for military use.
Obama officials said that the two sides came up with a tracking system specific to India that will rely heavily on a series of information exchanges, as well as some information that would come from the International Atomic Energy Agency, which monitors some but not all Indian nuclear plants.
The senior Obama administration official said they were “satisfied” and would “be able to comply with” U.S. legal requirements.
But India is a special case — and non-proliferation experts have special concerns about it. India’s first nuclear reactor dates to 1956; it now has 21 reactors at seven power plant sites. The United States and Canada withdrew support of the nuclear program after the country tested nuclear weapons in 1974, and the United States and Japan imposed sanctions after the 1998 tests.
Members of Congress will want to make sure that India cannot skirt the Bush-era legislation and that India did not simply wear down American negotiators.
“To get this contentious issue off the table, the Administration simply signed off on the same measures taken by India that the Administration had previously said were unacceptable,” said House Foreign Affairs Committee Chairman Edward R. Royce (R-Calif.) in a statement.
He took aim at the liability side of the agreement too, saying, “India has still not met its commitment to give U.S. companies the protection against unlimited damages that they need to do business there.”
Meanwhile, as India’s economy has grown, nuclear power has provided a tiny portion of its power generating capacity — just 2.5 percent. In the future, analysts say, India will continue to depend on its vast coal resources for the bulk of its electricity until 2030 at least.
And the energy landscape is changing rapidly. Solar power, for example, is becoming cheaper and easier to launch than a nuclear power plant. Modi’s government recently announced an ambitious plan to expand solar capacity to 100 gigawatts by 2020.
Even if the thorny details of the liability question are worked out — a big “if,” analysts say — American companies still face the political realities of India. Although the government concedes that nuclear power must remain part of its energy mix, particularly to counter rising greenhouse gas emissions, the plants remain unpopular with local residents and land acquisition can take years.
M.V. Ramana, a researcher at Princeton University who has written a book about India’s nuclear industry called “The Power of Promise,” said importing nuclear reactors from America may be an expensive choice. Ramana studied the costs of electricity at a proposed French-backed nuclear plant that would be built on India’s western coast and found that the electricity rates could be three times as high as those tied to other forms of energy.
“There is going to be a huge economic challenge,” Ramana said. “How can they make electricity affordable?”
In the end, M.K. Bhadrakumar, a former Indian ambassador and analyst, said the “breakthrough” touted by Obama and Modi may well end up being more of a diplomatic success than a commercial one.
“It was a sensible thing because the next time Modi meets Obama they don’t have to talk about something they are not going to resolve,” Bhadrakumar said. “They set it aside. It was creating bad air."
Is the India nuclear agreement really the ‘breakthrough’ Obama promised? - The Washington Post
NEW DELHI — President Obama stood alongside India’s prime minister, Narendra Modi, in India’s capital just days ago and announced a “breakthrough understanding” that the two countries hoped would pave the way for U.S. firms to sell nuclear reactors to India.
But analysts and experts familiar with the negotiations say that the legal issues remain so complex that private U.S. companies may continue to shy away from new deals in India, despite the developing country’s dire and fast-growing power needs.
So far, the details of the agreements have been sketchy at best, although the Indian government was expected to release more details Thursday. On Wednesday, however, officials in India said that the agreement includes three key parts: the establishment of an insurance pool that will cover nuclear operators and suppliers for up to $250 million in damages; a nonbinding legal memorandum asserting that Indian liability law is consistent with international norms; and a new system of reporting on the status of nuclear fuel and other materials supplied by the United States.
“We’ve been characterizing it as a breakthrough or breakthrough understanding,” said a senior U.S. administration official on Tuesday. But, the official said, “It is not a signed piece of paper but a process that led us to a better understanding of how we might move forward.”
The talks around the Obama visit were designed to remove some stubborn obstacles to the sale of U.S. nuclear reactors and fuel to India, sales that had been cut off after India exploded a nuclear device in 1974 and tested nuclear weapons in 1998.
In the waning days of the presidency of George W. Bush, amid warming relations, the United States finalized a landmark civilian nuclear agreement with India. The deal was supposed to open a new era of cooperation between the countries after years of sanctions and create thousands of jobs for American workers.
But the new cooperation failed to materialize. In 2010, the Indian parliament passed a strict liability law that angered many in Washington and effectively stalled efforts by companies like Toshiba’s Westinghouse Electric and GE Hitachi Nuclear Energy to sell materials or partner to build nuclear power plants in India.
Aides say Modi and Obama — who met in Washington in October and again at the G-20 summit in Australia in November — wanted to move beyond the gridlock. Negotiators met formally in New Delhi, Vienna and London in the following months and were frantically trying to forge a deal even as Obama landed in the Indian capital on Jan. 25.
The talks focused on two key issues. The first was whether, in the event of some catastrophe, victims could sue in Indian courts and win unlimited sums, as permitted under India’s 2010 legislation. The other main concern hinged on coming up with a way of keeping track of U.S. nuclear fuel sold to India to make sure it doesn’t go to military use.
On the liability front, Indian officials said that they will create an insurance pool to cover $250 million in damages in the event of a major accident, and the government would cover an additional $200 million after that. The country is also planning to align itself with the Vienna Convention on Supplementary Compensation, which governs nuclear liability globally. Still, critics charge, those sums are nowhere near the $200 billion estimated from the Fukushima disaster in Japan.
Analysts say the real test will be whether the two American-Japanese companies now sign commercial contracts with the Nuclear Power Corporation of India. The Indian government has already slated sites for nuclear power facilities for Westinghouse Toshiba in the western state of Gujarat and GE Hitachi Nuclear Energy in the state of Andhra Pradesh.
“My feeling is that there’s not as much there,” said Daryl Kimball, executive director of the nonprofit Arms Control Association, a non-proliferation watchdog group. “The real test is, will GE or Westinghouse say ‘this is good enough for us’ or not and whether they will sign contracts.”
Jonathan Allen, a spokesman for GE Hitachi Nuclear Energy, issued a statement that said that they “look forward to reviewing the governmental agreement.”
The key issue will be whether the conflict between international law and Indian law can be waved away by a memorandum from India’s attorney general. The memorandum would have to say that the 2010 liability law “doesn’t mean what it says,” said a Washington lawyer familiar with the issues but who asked for anonymity to protect his professional relationships.
“The fear is that the U.S. government will say this is good enough,” the lawyer added. “Even if the [Indian] attorney general comes out with a memorandum saying the law doesn’t apply to suppliers, that’s not binding on Indian courts.”
The second obstacle has been the requirement in the Hyde Act of 2006 that the Indian government and an independent auditor annually provide information about the form, amounts and location of any uranium supplied to make sure it is not diverted for military use.
Obama officials said that the two sides came up with a tracking system specific to India that will rely heavily on a series of information exchanges, as well as some information that would come from the International Atomic Energy Agency, which monitors some but not all Indian nuclear plants.
The senior Obama administration official said they were “satisfied” and would “be able to comply with” U.S. legal requirements.
But India is a special case — and non-proliferation experts have special concerns about it. India’s first nuclear reactor dates to 1956; it now has 21 reactors at seven power plant sites. The United States and Canada withdrew support of the nuclear program after the country tested nuclear weapons in 1974, and the United States and Japan imposed sanctions after the 1998 tests.
Members of Congress will want to make sure that India cannot skirt the Bush-era legislation and that India did not simply wear down American negotiators.
“To get this contentious issue off the table, the Administration simply signed off on the same measures taken by India that the Administration had previously said were unacceptable,” said House Foreign Affairs Committee Chairman Edward R. Royce (R-Calif.) in a statement.
He took aim at the liability side of the agreement too, saying, “India has still not met its commitment to give U.S. companies the protection against unlimited damages that they need to do business there.”
Meanwhile, as India’s economy has grown, nuclear power has provided a tiny portion of its power generating capacity — just 2.5 percent. In the future, analysts say, India will continue to depend on its vast coal resources for the bulk of its electricity until 2030 at least.
And the energy landscape is changing rapidly. Solar power, for example, is becoming cheaper and easier to launch than a nuclear power plant. Modi’s government recently announced an ambitious plan to expand solar capacity to 100 gigawatts by 2020.
Even if the thorny details of the liability question are worked out — a big “if,” analysts say — American companies still face the political realities of India. Although the government concedes that nuclear power must remain part of its energy mix, particularly to counter rising greenhouse gas emissions, the plants remain unpopular with local residents and land acquisition can take years.
M.V. Ramana, a researcher at Princeton University who has written a book about India’s nuclear industry called “The Power of Promise,” said importing nuclear reactors from America may be an expensive choice. Ramana studied the costs of electricity at a proposed French-backed nuclear plant that would be built on India’s western coast and found that the electricity rates could be three times as high as those tied to other forms of energy.
“There is going to be a huge economic challenge,” Ramana said. “How can they make electricity affordable?”
In the end, M.K. Bhadrakumar, a former Indian ambassador and analyst, said the “breakthrough” touted by Obama and Modi may well end up being more of a diplomatic success than a commercial one.
“It was a sensible thing because the next time Modi meets Obama they don’t have to talk about something they are not going to resolve,” Bhadrakumar said. “They set it aside. It was creating bad air."
Is the India nuclear agreement really the ‘breakthrough’ Obama promised? - The Washington Post
