Ten years of N-deal: Glass is just half full

The 10th anniversary of the Bush-Manmohan Singh nuclear deal has been a low-key affair. Obama and Narendra Modi did not rejoice from the rooftops. The respective ambassadors of the two countries wrote a joint op-ed hailing the improvement in bilateral ties. Ashley Tellis of the Carnegie Endowment declared with enthusiasm, “What a deal!”

Yes, the deal has indeed brought positive changes, and some run deep. Yet the glass is just half full. The deal’s highlight was supposed to be massive foreign investment in Indian nuclear power in India, with 10,000 MW each from the US, France, Japan and Russia. Alas, just 2,000MW has been signed with Russia, and absolutely zero with the others.

India’s nuclear legislation capped liabilities of suppliers. If there is an accident, the liability mostly falls on the operator—the Nuclear Power Corporation of India Ltd (NPCIL). But international lawyers say one clause of the law enables individuals to demand massive damages from equipment suppliers using tort law, enough to bankrupt any supplier. Although the Indian government and Attorney General have sought to assuage their fears, foreign companies remain fearful, and with good reason. Indian courts have gone activist, and will probably award massive damages on the ground of natural justice, regardless of formal laws. The Russians alone are going ahead since their supplier is government-owned and cannot go bust.

On the positive side, the lifting of nuclear sanctions has enabled India to stockpile imported uranium. Back in 2005, some Indian reactors were running at just 50% capacity (domestic uranium supply was insufficient). They are now running at 82%. Moreover, India has been able to commission new 500 MW reactors, and a 750MW reactor is coming. They are guaranteed ample imported fuel.

Before 2005, many sensitive technologies were withheld from India. After the Bush-Singh deal, those are increasingly available. India has struck several defence deals for the most sophisticated US armaments. In 2014, the US held more military exercises with India than any other country.

The terms of engagement have been transformed, says Tellis. Earlier India was the main target of US nuclear sanctions. Today it is increasingly seen as a natural US partner, though not a natural ally. Strategically, a strong India is seen by the US as a natural check on China, without implying any specific military issues or Indo-US deals. This explains why the US has backed India’s bid for the UN Security Council.

These are unquestionably significant developments. Yet their impact should not be exaggerated. Despite major military exercises, India will never ally with the US in the South China Sea or Middle East. Obama’s pivot to the East has by no means focused on India. When the US had maximum leverage in Pakistan, it could have insisted that Pakistan allow goods to pass seamlessly from India to Afghanistan. This would have helped Afghanistan as well as India. Yet the US failed to overcome Pakistan’s objections to this. It is ridiculous that India has to ship goods to Afghanistan via Iran. As the crow flies, Kabul is closer to Delhi than Mumbai, but is a very distant trade destination.

The 2005 nuclear deal was supposed to do much more than lift nuclear sanctions. The US was supposed to help integrate India into the complete global arms and nuclear networks through membership of four pacts—the Missile Technology Control Regime, Wassenar Arragement, Australia Group and Nuclear Suppliers’ Group. But the 10th anniversary has come and gone and India is not yet a member of any of these four groups. Progress has been too slow. The US seems reluctant to spend the political capital needed to force India’s entry into the Nuclear Suppliers” Group. This will allow India to export nuclear reactors.

Officials say Indo-USA trade is up from $30 billion in 2005 to almost $100 billion; most Fortune 500 companies are already invested in India; one lakh Indian students go to the US every year while a million Americans visit India; and the Indian diaspora now occupies top positions in every US walk of life. True, but many of these trends were strong even before the nuclear deal. The Indian diaspora had galloped upward in numbers and clout long before 2005. Indians had become a major force in US universities and Silicon Valley well before 2005. The US was India’s top export destination (over 15% of exports) even during the Cold War. Its share is now 12-13%, and exports to the UAE have in some years overtaken exports to the US.

So, the glass is half full. The main thing, as Tellis says, is that the terms of engagement have changed. The short-term gains have been limited, but the long-run relationship holds promise.

One thought on “Ten years of N-deal: Glass is just half full

  • 2015.Jul.28 at 12:59

    True, the glass is half full.


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