A month after the > “breakthrough understanding” on the nuclear liability issue was announced by U.S. President Barack Obama and Prime Minister Narendra Modi, its practical value now looks diminished, while its symbolic importance as indicating the willingness of the two sides — India and the U.S. — to start a new chapter in the relationship comes to light. It was a willing suspension of disbelief on both sides to move on to new areas of cooperation, which have revitalised a defining relationship of the 21st century.
The irony of the announcement on the progress in the nuclear liability issue is that its architects were once the arch enemies of the nuclear deal. As a Senator, Mr. Obama had moved killer amendments to the deal in its early years. Mr. Modi’s party supported the liability bill to kill the deal, which they could not defeat on the floor of Parliament. Neither of them could have their heart in finding a way to open nuclear trade with each other. Mr. Obama would rather sell sophisticated weapons and technology to India to restore balance in bilateral trade. Mr. Modi has not listed nuclear trade in his list of priorities.
A test for India A conspiracy of circumstances, however, made it imperative that Mr. Obama and Mr. Modi should make progress on the liability law. According to American commentators, the liability law was a test of the new Indian government’s strategic global outlook and willingness to fulfil its commitments. For Mr. Modi, the solution to the liability issue was necessary to revive the bilateral relationship in order to secure his primary objectives of “First Develop India” and enhancing defence technology. For both of them, it became a symbol of a new beginning, marked by a demonstrated ability to overcome impediments, even if it has left issues unresolved for the time being. A show of solidarity was more important than the commencement of reactor imports. It was the legal solution for a political issue.
The resolution of the > liability issue was on the wish lists of both the U.S. and India and it became the litmus test of the success of the visit. Apart from the business community of the U.S., the other suppliers, such as Russia and France, were also keen to have the issue resolved. Even the Indian manufacturers of components were nervous about the liability issue and its potential to wipe out their profits. The sense of euphoria that was created by the announcement that “the deal was done”, whether by design or otherwise, did more good than harm to the whole visit.
The liability issue has not been resolved and many loose ends remain even after the announcement of the details. But the announcement of the understanding created the atmospherics on the first day of the Obama visit, leading to the historic declaration on the Asia-Pacific and Indian Ocean Region Vision statement, the real breakthroughs in India-U.S. relations. The solution of working around the liability issue gave fresh confidence to both countries to move to strategic cooperation and defence co-designing and co-production under the Defense Technology and Trade Initiative (DTTI).
Political significance Many lawyers and analysts in both countries list deficiencies in the new arrangement by arguing vigorously that the law cannot be bypassed by administrative action. The intention of the liability law was to impose liability on the suppliers, and letting the suppliers off the hook would be morally and legally unacceptable, they contend. Some in India characterise the arrangement as totally against public interest and as a concession with no tangible benefits for India. They predict, not without reason, that it might be struck down by courts. They are not wrong in law, but they miss the political significance of the move.
What should not be forgotten in such analyses is that the > liability law was introduced in Parliament by evoking the horror of the Bhopal tragedy, but the real purpose was to block the implementation of the nuclear deal at least with regard to the U.S. The tears that were shed in Parliament by some speakers on account of the Bhopal tragedy could well be crocodile ones because they knew that it was not the absence of a liability law that resulted in poor compensation to the victims. The ineptness with which India reacted to the Bhopal tragedy was shameful, to say the least. It was also intended to make India breach the promise it had made to the U.S. government that it would purchase nuclear material worth $10 billion. In other words, it was a political move to drive a wedge between India and the U.S., and not to increase the possibility of higher compensation for the victims. The lament that the present arrangement will reduce compensation is, therefore, deceptive. Those who have been nervous about India getting closer to the U.S. are voicing it. They first expressed cynicism about a U.S. President being powerless, were then silent over the success of the visit, and then took recourse to denigrating the liability arrangement.
Potential obstacles Those who express concern over the imperfections of the arrangement should seek solace in the fact that nothing will change in a hurry. The liability bill is not the last obstacle to India-U.S. nuclear trade. Many provisions of the export control laws will raise their heads along the way even if companies in the U.S. accept a settlement on liability, which contradicts international law. Mr. Obama is in no hurry to sell reactors to India and incur the wrath of the non-proliferation hawks for strengthening India’s nuclear capability even under safeguards. I was told by a senior White House official in 2009 that the U.S. had nothing to lose by not having nuclear trade with India. The U.S. had not manufactured reactors for several years and these would have to be specially fabricated. India was free to buy reactors from Russia or France.
Although the nuclear deal was hugely significant for bringing India into the nuclear mainstream, grey areas remain when it comes to its implementation. The extent of “full” civilian nuclear cooperation is yet to be defined. Does such cooperation cover the enrichment of uranium and reprocessing of spent fuel? The ghosts hidden in the Hyde Amendment will emerge in the future if the U.S. finds it necessary to report that certain aspects of Indian foreign policy are contrary to the vital interests of the U.S. The most optimistic prediction is that a U.S. nuclear reactor could be operationalised in India in about 10 years. Many economic, political and scientific developments would take place in the interregnum, including changes in leadership in both countries.
The nuclear picture A major factor to remember is the gloomy prospect of nuclear power itself in the post-Fukushima world. Many countries have either abandoned nuclear power or are in the process of reducing their dependence on it. Even today, there is no clear estimate of the lasting damage in Fukushima or the cost of a clean-up, because of the extreme secretiveness of the Japanese authorities. Those evacuated from the affected areas are still in temporary shelters, without realising that they would not be able to move back to their homes in their lifetime. India has decided to carry on with business as usual, but it cannot but review its position when it makes progress on alternative sources which may become substantially cheaper. The price per unit of electricity generated with nuclear power will increase when the insurance costs and the costs of safety are added on account of the latest developments.
“ To those in the U.S., progress on the nuclear liability law was a test of the Modi government’s strategic global outlook. For Mr. Modi, a solution was necessary to revive the bilateral relationship. ”
The Kudankulam experience, of operating imported reactors, is far from encouraging and the popular movement against such reactors will only grow in the future. The first reactor at Kudankulam reached 97.68 per cent criticality in January this year and not in December 2008, as originally envisaged. The criticality of the second reactor has been delayed again.
Russia has already fired the first salvo against Westinghouse (U.S.) and Areva (France) reactors by claiming that the cost of electricity generated in the U.S. and French reactors would be double the production cost at Kudankulam. The cost of additional investments for insurance and installation of safety equipment might make them unaffordable. The nuclear picture would change by the time negotiations begin under the new arrangement. Perhaps, India’s nuclear power policy may change before the new rules on liability come into force.
Teresita Schaffer of ‘South Asia Hand’ has characterised the > nuclear understanding as “a leap of faith” to gain a degree of comfort between the two countries. “At this point, it is significant that the two governments are trying to go together into uncharted territory in dealing with a knotty issue.” In other words, it is a declaration of intent to resolve difficult issues; not a solution to the liability imbroglio. The final settlement may come at a different time under different leaderships. For the present, it is important to keep the dialogue going for the greater good of the two countries. The understanding may have value which goes beyond nuclear trade. It was an ice-breaker between Mr. Obama and Mr. Modi, which enabled them to wade into more vital issues.
India is playing on several chessboards at the same time. Every move may not appear logical or productive and there may even be setbacks. Some moves may have to be abandoned as the situation dictates. Mr. Obama’s strong pronouncements on religious intolerance in India may have already muddied the waters. The election results in Delhi may be another dampener. The move on the liability law may be tentative and unsatisfactory, but it was absolutely necessary for gains in other areas. It may still be a liability, but other assets may well be on their way. Strategic patience is required to exercise strategic autonomy.
(T.P. Sreenivasan was Governor for India of the IAEA from 2000 to 2004.)