Areva, CGN, China General Nuclear Corporation, China National Nuclear Corporation, CNNC, energy, Fast Breeder Reactor, FBR, General Electric, India, Japan, nuclear, Rosatom, Westinghouse, Yomiuri Shimbum
News of an agreement on civil nuclear cooperation between India and Japan has been met with much fanfare in the Indian media. The announcement came on the second morning of Japanese prime minister Shinzo Abe’s three-day trip to India to attend the ninth annual India-Japan Summit. Despite the celebratory tone in India, the fine print and context of what was agreed upon between the two nations is less than satisfactory and will mean little in practice.
The nuclear deal has been a sensitive subject between Delhi and Tokyo for the past five years. In 2005, the United States spearheaded the effort to recommence international nuclear commerce with India, urging the International Atomic Energy Agency (IAEA) and the Nuclear Suppliers Group (NSG) to consider Delhi’s excellent nuclear non-proliferation and safety credentials and make an exception for the South Asian country despite its refusal to accede to the Non-Proliferation Treaty. The international legal infrastructure was in place by 2008, and India has since concluded several nuclear cooperation agreements enabling it to purchase nuclear equipment and fuel from the international market. Delhi’s increasingly warm relations with Tokyo had led the former to believe that the latter would also ink such an accord once the United States and other major powers had done so. Mistakenly, as it turned out.
Japan holds an important position in international nuclear commerce. Over the years, the island nation has developed expertise in manufacturing several critical reactor components of high quality and become a key node in the supply chains of at least three of the major nuclear vendors, namely the French firm Areva and the American firms General Electric and Westinghouse. Among the major players, only Russia’s Rosatom and China’s two major state-run nuclear vendors – China General Nuclear Power Group (CGN) and China National Nuclear Corporation (CNNC) – are independent of Japanese components. As per Japan’s strict export controls stipulating end-user certification and other conditions, US and French nuclear firms would first need the permission of their Japanese suppliers before doing business with India. Tokyo’s consonance on nuclear cooperation with India thus achieved a greater import, not to mention the symbolic value India put on such an agreement as an indicator of its nuclear normalisation.
The declaration at the India-Japan Summit falls considerably short of a nuclear deal. The two sides merely signed a memorandum of understanding that has punted the legal and technical differences further down the road. In essence, this means that Japan has only agreed to the principle that it can conclude a civil nuclear cooperation agreement with India, that it will make an exception to its rule of not conducting nuclear commerce with a state that is not a signatory of the NPT. This is progress, no doubt, but what price Japan will extract for its concession in terms of technical requirements or how long the nuclear deal will take to operationalise is anyone’s guess. If the joint statement between the two countries is any indication, Japan’s pound of flesh will probably include Indian concessions on the Comprehensive Test Ban Treaty (CTBT) and the Fissile Material Cut-Off Treaty (FMCT). India’s view has been that both these treaties perpetuate the nuclear apartheid regime that the NPT is the foundation of. Although India has of its own volition declared a moratorium on future nuclear tests, being party to a legally binding agreement is a bridge too far from Delhi’s perspective. Furthermore, a historical perspective on the fate of India’s MoUs may be had by looking at the country’s role in upgrading the Iranian port of Chabahar or its Medium Multi-Role Combat Aircraft (MMRCA) contract.
Even if India and Japan had succeeded in inking a comprehensive civil nuclear cooperation agreement, the chances of it having much impact on India’s nuclear energy sector are slim. As part of its agreement with the United States, India agreed to bring into force a nuclear liability law like all other states with nuclear facilities. However, Delhi’s interpretation of liability, informed as it was by the Bhopal Gas Tragedy of 1984, was not in congruence with the international standard that limited damages and made the operator solely responsible for economic compensation. Consequently, no vendor is willing to enter the Indian nuclear market. Chairman Jeff Immelt stated categorically that he was not willing to expose his company to the risks Indian liability law required of nuclear suppliers, and Areva has slowed down its work at Jaitapur pending further clarifications regarding liability despite signing a pre-engineering agreement for the site with Larsen & Toubro in April 2015. Similarly, Westinghouse has been remarkably silent on its interest in India since January 2015 when US president Barack Obama and Indian prime minister Narendra Modi achieved an expensive and convoluted workaround on supplier liability by establishing an insurance pool for nuclear vendors.
The only benefit India is likely to accrue from an agreement on nuclear cooperation with Japan is the transfer of technology for reactor components, particularly Japan Steel Works’ forging of large, single-plate reactor pressure vessels. India may also diversify its suppliers and develop its indigenous nuclear energy industry. While both of these are welcome developments, they will not amount to the rapid expansion of nuclear energy in India that was envisaged in the wake of the Indo-US nuclear deal in 2008. Another possible benefit, if Modi is capable of being so bold, is the acquisition of plutonium and spent nuclear fuel for use in India’s Fast Breeder Reactors (FBR). This will expedite the introduction of thorium reactors in India, which are safer, cleaner, cheaper, and more proliferation-resistant than conventional reactors.
There is some debate about why Japan has made even this slightest of shifts in its position on nuclear cooperation with India. The Yomiuri Shimbum, arguably Japan’s leading daily, suggests that China’s forays in emerging as a major nuclear vendor has Tokyo worried. By various means, Beijing has acquired advanced Western technology and incorporated it into its own designs that are now being marketed to the world. China’s large reserves of foreign exchange also allow it to extend generous lines of credit to its customers who would be happy with a greater range of international partners. Additionally, by retreating from the international nuclear market and refusing to supply major customers, Japan will lose its technological edge in the field as Britain has. This is a plausible explanation but betrays the newspaper’s conservative leanings more than reveal Tokyo’s reasons: any argument along these lines must also take into account that there is still a large lobby against nuclear relations with a non-signatory of the NPT like India as well as the opposition to nuclear energy expansion in Japan; restarting the country’s fleet of 43 idling reactors has itself been a challenge for the Abe government.
From an Indian point of view, there are strategic as well as economic considerations at play here. Abe is not unaware of this, but he must also be able to sell this deal to his domestic audience and have it approved by the Diet. It might be his thinking that this is best achieved in small, incremental steps as the MoU was. In the meantime, there is much Modi can do to maximise the gains from a nuclear deal with Japan when it comes. It involves reforming the Atomic Energy Act to allow active participation by the private sector, establishing a de facto and de jure independent regulatory authority, improving transparency in the nuclear sector, and amending India’s nuclear liability to conform to international norms. Whatever the potential benefits of a civil nuclear cooperation agreement with Japan may be, India has not achieved them today.
This post appeared on FirstPost on December 13, 2015.