Progress and Challenges Related to the Indo-US Civil Nuclear Deal

Dr Vijay K. Sazawal

Introduction

This paper seeks to address factors that led to the Indo-US civil nuclear deal, initial expectations, how those expectations evolved over time, policy drivers that keep the two parties from reaching a rapid closure on the issue, and what it will take to make this deal a success.

Background

The subject of granting “various rights and privileges available to signatories of the Nuclear Non-Proliferation Treaty (NPT) even though India would remain a non signatory” has come up in bilateral discussions between the U.S. and India ever since the U.S. lifted partial sanctions that were imposed following Indian nuclear tests in May 1998. In fact, a “non-paper” on the subject was passed by Jaswant Singh to his interlocutor Strobe Talbot during a meeting in London following the re-election of the NDA Government led by Vajpayee in 1999. Nothing came of it then as Democrats in charge of the U.S. government knew that it would be nearly impossible for them to deliver a deal that very few, if any, in their party would support. Furthermore, Mr. Talbot and his colleagues believed that if India was given such privileges so should Pakistan as the rivalry between the two would otherwise intensify to the detriment of regional security.

The subject resurfaced during the Bush Administration that followed Mr. Clinton in 2001. Mr. Robert Blackwill, who served as a foreign policy advisor to President Bush during the 2000 election campaign as a member of the “Vulcans” (foreign policy advisory group led by Dr. Condoleezza Rice, who subsequently became the National Security Advisor to the new President), was made the Ambassador to India. Ambassador Blackwill saw a strategic value in creating a special friendship between the U.S. and India, and knowing India’s desire to re-engage in nuclear commerce, strongly advocated support for such a deal. However, his resignation as the Ambassador in 2003, followed by the Indian election in 2004, put the deal on a relative backburner until Dr. Rice became the U.S. Secretary of State in 2005.

As much as the Indian Foreign Service officials and the then foreign minister, Mr. Natwar Singh, wanted to push for such a deal, the political leaders in New Delhi were not so sure. Dr. Rice made the nuclear deal the centerpiece of the U.S. effort to build a fundamentally different relationship with India, hoping it would lead to some bilateral nuclear commerce that would benefit American companies but she saw its importance mainly in creating a friendly environment for selling U.S. military hardware to India, the country being among the largest importer of arms in the world. Prime Minister Manmohan Singh and the Congress Party leader, Sonia Gandhi, however led a fractious group of diverse political parties – from communists to regional heavyweights – and both were unsure if the deal would be approved by the Indian Parliament. Within India’s nuclear and security community, many saw the deal as a game changer, while an equal number of policy experts saw it as constraining the Indian “Swadeshi 3-stage nuclear program” intended to exploit to energy value of India’s abundant thorium, or infringing on Indian sovereignty and national security. The deal was eventually signed during Prime Minister Singh’s visit to Washington on July 18, 2005.

When the U.S. Administration made the deal public, it raised a lot of hue and cry among the American politicians as well. In particular, Congressman Henry Hyde, the powerful Chairman of the House Foreign Affairs Committee, was incensed that the Bush administration will make such an exception for India. He called Dr. Rice to his chambers, and once the anger subsided, the Congressman asked how many jobs the deal would create in the U.S. nuclear industry as that information would be his rationale for seeking endorsement of the deal from fellow Congressmen in the Committee and in the full House. Dr. Rice, and her supporting team in the U.S. Department of State, had not assessed the value of deal beyond its strategic implications, and therefore did not have such information. The request was passed on to the U.S. Department of Energy (DOE), but no such data existed there either. In fact, outside of some classified data related to India’s weapons program, there was only sketchy information available about India’s nuclear power program among the scientific community in the U.S. Perhaps because India was under rigorous sanctions until then, no effort had been made to collect such data.

In February 2006, Mr. David Garman, the DOE Under Secretary, attended a meeting at the U.S. India Business Council (USIBC) in Washington where he asked if the U.S. industry had any data indicating how many jobs will be created by a possible nuclear deal with India. But the industry was equally ignorant, and I being the only nuclear specialist on the USIBC team was requested by Ron Somers, head of the USIBC, to prepare such a report.

India’s Nuclear Power Programme

I knew it was not going to be easy to explain the unique Indian nuclear power program and its future prospects to an audience unfamiliar with the rationale and progress of the nuclear program in India. The general expectation in the U.S. is that since India is a developing country with surging growth rates, it would require insatiable amounts of energy, including nuclear power, to meet growing demands in electricity. However, India’s nuclear power program is not geared to match immediate power needs of the country. India has an exquisitely planned 3-stage nuclear program which would result in nuclear contributing 25% or more electricity to the national electric grid by 2040 and beyond, utilizing indigenously designed and built nuclear reactors using India’s abundant thorium fuel supply. The overarching program is currently in stage 1 for power production (and deeply engaged in research and development of stages 2 & 3), which is contributing miniscule amounts of power, about 2.5% of the total electricity demand to the national grid, produced mainly from indigenously designed and built pressurized heavy water reactors (PHWR’s). Any near-term expansion of the stage-1 program would happen only if it technically supported the 3-stage program in order to ensure an optimum balance in fuel supply, reprocessed fuel, nuclear waste, and cost.

Indeed, technical experts in the Indian nuclear program had concluded by the mid-1990’s that eight (8) imported light water reactors (LWR’s) would be required during the stage 1 to supplement the planned construction of indigenous PHWR’s in order to generate sufficient spent fuel for reprocessing and subsequent use in fast reactors (stage 2) and thorium reactors (stage 3). Subsequently, the Union Cabinet approved purchase of eight imported reactors by the Department of Atomic Energy (DAE).

When I wrote the paper for the USIBC in February 2006, I made it clear that the Government of India had given clearance to DAE to enter into contracts for up to eight foreign reactors, two of which were already under construction at Kudankulam, two additional imported reactors were planned to be built at the same site, and India was in serious negotiations with the French to procure two reactors to be sited at Jaitapur. Since six out of the eight imported reactors were already accounted for, that left open the possibility that India could buy two reactors from the U.S.

My report caused great consternation among the corporate community in the U.S. who were expecting huge reactor orders from India. Numbers like $100 billion in projected reactor sales were being tossed around in the USIBC and my report was unceremoniously shelved.

However, my report did draw the attention of Dr. Rice, who found it perfect for the article she wrote to “sell” the U.S.-India deal to the U.S. public and the U.S. Congress. Writing an op-ed piece in the Washington Post on March 13, 2006, she stated that, “…. Third, our agreement is good for American jobs, because it opens the door to civilian nuclear trade and cooperation between our nations. India plans to import eight nuclear reactors by 2012. If U.S. companies win just two of those reactor contracts, it will mean thousands of new jobs for American workers.”

As much as Dr. Rice saw the future of the new bilateral relationship with India mostly in strategic terms tied to defence sales, intelligence sharing, and a balancing act against the Chinese, the U.S. nuclear vendors began to express their unhappiness at the deal and wanted India to purchase additional foreign reactors. This was the time when the U.S. Congress had to approve a measure to grant an exception to India in order for the two countries to sign the civil nuclear “123” Agreement. There was a great degree of diplomatic and commercial pressure put on India to “come through” on its pledges and commit to purchase of additional reactors since the U.S. was single-handedly helping India to re-enter the global civil nuclear commerce.

The relief came in terms of a new analysis completed by the DAE in the summer of 2008, which was made public at the IAEA General Conference in Vienna in September 2008. The new analysis indicated that without additional LWR imports, India will have a deficit of 412 GWe by 2050 even after all other fuel sources like coal, hydroelectric, renewables, hydrocarbons, etc. are accounted for. But if 40 GWe in LWR’s are imported immediately (by 2020), it would have a “multiplier effect” of providing sufficient reprocessed fuel for stages 2 and 3 of the nuclear program and would wipe out the entire deficit predicted without imports in 2050. It seemed more like an empirical analysis given that the country lacked capacity building to ensure such mammoth expansion of nuclear power in just 12 years, but it provided the logic for subsequent planning within DAE.

Based on the new DAE analysis, and following the exception granted to India by the Nuclear Suppliers Group (NSG) on September 6, 2008, the Indian government sent a letter to the U.S. government (at the urging of then U.S. Ambassador, David Mulford) on September 10, 2008, affirming following key points:

• India will offer two nuclear plant sites to American reactor vendors without any global tendering allowing them to build nuclear plants in India amounting to 10GWe or more, provided technical and commercial terms are acceptable to both parties and result in affordable power
• India will complete the separation of its civil and military nuclear programs as per the agreed schedule, and implement the India-specific Additional Protocol as agreed with the IAEA on August 1, 2008
• India will develop its nuclear liability regime consistent with the Convention on Supplementary Compensation (CSC) for nuclear damage

This letter, unfortunately, created unintended consequences.

American vendors, noting that India had committed to buy U.S. reactors without competition, reacted differently than what India’s nuclear operator, National Power Corporation (NPCIL) had hoped for. Neither of the two vendors paid attention to the requirement that the tariff generated from the plant had to meet specific guidelines of the Central Electricity Board. Indeed, it is for that very reason NPCIL has created a business model where the plant designer/technology provider enters into an open “teaming arrangement” (as against a “prime-subcontractor” relationship) with NPCIL to work jointly, allowing NPCIL to bring its experience in value engineering, reforming supply chain efficiencies, reducing contingencies with discrete fixed-cost subsystem packages, etc., to be incorporated in the foreign designed plant to be built in India. But one of the U.S. vendors insisted on using its own business model which gave NPCIL diminished capability to explore ways and means of streamlining hardware and management costs quoted by the vendor. The second nuclear vendor decided to market in India its first-of-a-kind reactor, contrary to the Indian practice of requiring a foreign plant be licensed by the home country’s nuclear regulator and be already constructed or in substantial stages of completion elsewhere before it can be built in India. I am not sure how such a plant will be judged for establishing a viable tariff regime.

On the other end, India failed to fully comprehend the overwhelming influence of litigation and legal judgments that shape American business decisions. The commitment to pursue the CSC liability regime was made, in my view, without a full understanding of American sensitivities. In hindsight, it would have been easier for India to have signed to the Vienna Convention as Indian lawmakers are familiar with a long-standing Indian association with the IAEA, and such an approval would have received Parliamentary approval with minimal review. CSC could have been considered at some later stage in the future. There are presently two global nuclear liability regimes supported by the IAEA. The European law (“Joint Protocol”) is inconsistent with the U.S. domestic liability law called the Price-Anderson Act, whereas the U.S. law is consistent with the CSC. The U.S. has initiated a large diplomatic offensive to sign countries without a liability law to the CSC, and its insistence on the CSC is not directed only at India.

India passed a historic civil nuclear liability law in 2010, and Rules for implementing the Act were published in 2011. The U.S. government and American vendors deemed the law unsatisfactory and have been seeking a change in the law. India contends that the law is consistent with the CSC since Article XII.2 of the CSC allows harmonization of the CSC with domestic laws under certain conditions. The Indian government has repeatedly stated that it is willing to work with U.S. vendors “to develop mutually acceptable solutions to this issue within the four corners of its domestic liability law.” There is currently an impasse in this matter, and continuing discussions between the two sides have failed to resolve this matter until now. Meanwhile, one of the two U.S. nuclear vendors still does not meet Indian statutory requirements to sell its proposed Generation III+ reactor in India.

Delays in reaching a closure on the liability issue is also affecting other contiguous issues dealing with Administrative Arrangements under the 123 Agreement, and on a related issue dealing with the determination by the National Nuclear Security Administration (NNSA) to place India in an authorization category for a case-by-case approval for nuclear “810” technology transfer to India. Experience with a scant few “810” technology transfer approvals for India indicates that the process is laborious and time consuming. Establishing even a limited design and hardware supply chain in India for U.S. nuclear vendors is mostly impossible at this time.

India has completed its obligations under the Separation Plan ahead of the December 2014 deadline, and ratified the IAEA India-specific Additional Protocol in June 2014.

There are, however, new perspectives evolving within the U.S. Government in regards to the liability issue. Recent thinking within the U.S. Government was mentioned by the Assistant U.S. Secretary of State for South Asian Affairs, in testimony in the U.S. Senate Foreign Affairs Committee on July 16, 2014 when she stated that, “While we have not yet had detailed discussions with the new government in New Delhi on the way forward on civil nuclear cooperation, we believe that there may be an opening to address nuclear liability issues either through a legal framework or through other frameworks that can help create more surety on what the application of liability might be, so that it is not unlimited liability as the companies are rightly concerned.”

While the primary U.S. reactor vendors are insistent on a legislative fix, a flexible approach such as proposed by the U.S. Department of State opens possibilities for other options especially for sub-tier suppliers who, based on a case-by-case risk-benefit analysis, may find non-legislatives fixes to the equally effective in ensuring proper indemnification for their products and services with a broader appeal to serve the growing Indian nuclear market in addition to primary American nuclear vendors. However, creation of a sound nuclear liability insurance program by India is absolutely important in that case.

Finally, nuclear power is capital intensive and hence very expensive. Some countries are reconsidering whether to buy nuclear reactors or look at alternatives. The low price of electricity (and in India the price is among the lowest) puts additional pressure on nuclear vendors to reshape their business models and marketing strategies to meet customer needs. The traditional American business model used by American utilities and reactor vendors cannot and will not serve new and developing markets overseas. The mantra of “affordable power” places a burden on both owner-operator and nuclear vendors to demonstrate their collective ability/plans to meet consumer expectations on tariff, because without a customer there is no sale – whether or not the vendor selection is made competitively or by invitation. India has an envious record of being among the three countries (along with South Korea and China) that can put up a domestic nuclear plant at a much lower than average global overnight construction price. It would be unwise for the U.S. nuclear vendors not to adjust their business model in India, and for the U.S. government not to create an India specific “810” technology transfer regime that will maximize the use of local manufacturing supply chain, intellectually bright manpower, and access to other quality resources.

In closing, I am reminded of the brief statement that the Prime Minister made during his maiden visit to the Bhabha Atomic Research Centre (BARC) on July 21, 2014, stating that “Growing international nuclear cooperation is a welcome development, provided such projects can be timely, meet techno-economic viability and safety standards, and such partnerships result in substantial technology transfer.” I believe the two sides can reach a satisfactory closure with a better understanding of the situation and by being flexible to accommodate each other’s redlines.

In the end, there is no reason why the Indo-U.S. nuclear deal cannot be a shining example of successful cooperation between the two great nations.

APPENDIX


Timeline - Indian Three Stage Civil Nuclear Program and the Indo-U.S. Nuclear Deal

Prime Minister’s visit to BARC on 21^st July:

• Three-fold increase in nuclear power at the end of 13^th 5-yr plan, as planned
• Growing international cooperation is a welcome development, provided such projects can be timely, meet techno-economic viability and safety standards, and such partnerships result in substantial technology transfer
• Not to ignore self-reliance in the nuclear fuel cycle and proceed full steam with commercial utilization of thorium

India’s “Swadeshi nuclear fuel cycle”- The amazing vision of Dr. Homi Bhabha:

• 1939: Bhabha denied re-entry into U.K.; plans for harnessing the power of atom without government (British colonial power) support
• 1948: Free India constituted the Atomic Energy Commission (AEC), Bhabha selected as its first Chairman reporting directly to the PM
• 1954: India announced its plan to harness the power of atom by maximizing utilization of its abundant thorium reserves; the program is directly at odds with key elements of the U.S. President’s speech at the UNGA on 8^th December 1953
• 1955: Unfettered access to the PM ensured that the Indian 3-stage indigenous nuclear development program is viewed synonymous with Indian leadership of NAM; Bhabha chaired the Geneva Conference preceding the formation of IAEA
• 1956: India co-opted in the “Washington Group” to canvass for IAEA membership in NAM; India successfully argued against the creation of a uranium cartel and the centralized storage of plutonium to enhance IAEA membership
• 1965: India joined the ENAC to propose principles for the NPT being considered
• 1968: India announced in UNGA that it will not sign the NPT
• 1970: NPT comes in force; India excluded from the 1971 Zangger Committee

India’s 3-stage program is thorium-centric and program’s scope and schedule has been affected by many challenges in implementing the first-of-its-kind approach:

• 1965: Stage 1, which started with RAPP-1 operations, is initially hampered by limited uranium resources and Zangger/NSG restrictions, is now paced by capacity building and need for additional and accelerated plutonium stockpile based on cutting edge research and modelling in thorium fuel cycle by BARC
• 1985: Stage 2 phase was initiated with operation of 40 MW Fast Breeder Test Reactor; 500 MW Prototypic Fast Breeder Reactor (PFBR) is expected to begin operations in 2014 (after a 2-year delay)
• 1996: Stage 3 phase initiated with operation of world’s only 30 kW U-233 (derived from thorium) fuelled reactor; design of 300 MW Advanced Heavy Water Reactor (AHWR) completed and site selection is underway
• 1998: Import of foreign light water reactors (LWR) planned to shorten Stage 1 period; initial research indicated that 8 imported LWR’s are needed and received approval from the Cabinet, a reassessment indicates it could be as many as 40
• 2025: Domestic LWR program operational to supplement or replace purchase of imported LWR’s to provide needed spent fuel quantity for generating reprocessed reactor fuel for Stages 2 and 3 programs
• 2035: Technological challenges indicate that Stage 3, utilizing India’s abundant thorium, will not be fully commercialized until at least until 2035 or beyond. With proper planning for capacity building, fully indigenous Stage 3 may meet about 25% to 50% of electricity demand, resulting in a dramatic reduction in greenhouse gases, and high reliability in assured fuel supply and energy security

Advent of Indo-U.S. nuclear cooperation:

• 1954: USA promoted “nuclear diplomacy” as part of the Cold War; India was a leading beneficiary, and the first Indo-U.S. “123 Agreement” was signed in 1956
• 1963: Indo-U.S. agreement for “turnkey” construction of Tarapur 1&2 reactors (TAPS) signed; U.S. contractually required India to buy only U.S. nuclear fuel and put the plant under IAEA safeguards; TAPS connected to electricity grid in 1969
• 1974: Indian nuclear test triggered U.S. sanctions, including stoppage of TAPS fuel supply; NSG was set up in a secret meeting in London in April
• 1975 to shut out India from global nuclear commerce
• 1978: The U.S. NNPA came into force; All prior 123 Agreements required renegotiation of bilateral civil nuclear agreements that are now very restrictive

A new chapter begins in the Indo-U.S. nuclear cooperation:

• 2005: U.S. announced plans to grant “full” civil nuclear energy cooperation
• 2006: U.S. Congress granted India exception from NNPA; new 123 negotiated
• 2008: India agreed to buy U.S. reactors without global tendering, PROVIDED the mutually acceptable terms and conditions would result in a viable tariff regime for electricity generated
• 2008: India Specific IAEA Safeguards finalized; NSG exception for India granted; New Indo-U.S. 123 Agreement finalized
• 2009: India announced two nuclear sites for American nuclear vendors in Chhayamithi Virdi in Gujarat and Kovvada in Andhra Pradesh
• 2010: Nuclear Liability Law passed by the Indian Parliament
• 2011: Rules pertaining to the new liability law submitted to the Indian Parliament and published in the official Gazette
• 2013: Westinghouse and NPCIL signed an “Early Works Agreement” prior to the visit of PM to the U.S.
• 2014: Westinghouse completed initial tasks under the EWA and is reimbursed for its services by NPCIL
• 2014: U.S. Government shows flexibility in resolving the liability issue, U.S. nuclear vendors however adamant; lost in the fog of corporate media buzz: the price of electricity to Indian consumers

(The author is an atomic industry expert. The author presented this paper at a talk by him at the VIF on Progress and Challenges Related to India’s nuclear deal, on August 8, 2014)

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Published Date: 24^th September 2014, Image source: https://prabaharan.files.wordpress.com

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

Indo-US Relations and Balance of Power

Kanwal Sibal

Member Advisory Board, VIF

The direction of our strategic ties with the US has come under renewed focus with US Defense Secretary Leon Panetta’s visit to India on June 5-6 and the third round of the Strategic dialogue between India and the US at the Foreign Minister level at Washington on June 13.

During his visit to Delhi after visiting the US Pacific Command Headquarters in Hawaii, Singapore, Cam Ranh Bay and Hanoi in Vietnam- an itinerary that speaks for itself- Panetta spoke about the new US defense strategy of “rebalancing” toward the Asia-Pacific region by expanding US military partnerships and presence in the arc extending from the Western Pacific and East Asia into the Indian Ocean region and South Asia. A few days earlier at the Shangri-La dialogue in Singapore he announced that the US will shift 60% of its naval fleet, including as many as six aircraft carriers, to the Pacific Ocean by 2020. The Pentagon has also referred to India as a link India between East and West Asia and a net provider of security from the Indian Ocean to Afghanistan and beyond.

The US seems to have concluded that there is no political down-side to identifying India openly as a crucial element in this new defence strategy. In its judgment neither the Indian government nor the majority of public opinion will recoil at being so visibly enlisted as a defence partner of the US in its expanded military role in Asia. The US is aware of the degree of controversy generated in India by the Indo-US nuclear deal, in terms of its ramifications for India’s strategic independence. It is cognizant of Indian sensitivities about unwanted messages going out to Russia and China from the degree of India-US defence engagement. Yet, Panetta has not hesitated in Delhi to describe India, with its size and military capability, as a lynchpin in this US strategy.

General Dempsey, chairman of the US Joint Chiefs of Staff, has subsequently underlined India’s enormously important geostrategic location on the sea lanes of communication from the Mid-east to the Pacific. Noting that India will soon have the second largest fleet of in the world with an expanded reach and ability to rapidly deploy, Panetta sees an India-US partnership in assuring a peaceful Indian Ocean region, besides seeing India’s voice and involvement in Southeast forums such as the ASEAN Defence Ministers Meeting Plus as being critical to prevent and manage regional tensions.

Panetta spoke publicly in Delhi about India-US defence relationship becoming more strategic, practical and collaborative through regular defence policy exchanges, military exercises that cover all functional areas of naval warfare, prospects for advanced R&D, sharing of new technologies and joint production of defence equipment, as well as defence sales and intelligence sharing.

In understanding the import of these statements one needs to sift reality from future possibilities. Military exercises undoubtedly constitute a very substantial element of growing India-US defence ties, but these precede the declaration of a strategic partnership between the two countries. US defence sales to India have grown from virtually nothing to US $ 8 billion in the last five years or so, which is remarkable progress. It is doubtful if the content of defence policy exchanges with the US is substantial, not the least because the integration of defence and foreign policy, unlike in the US, is inadequate in India, which is a big handicap in such discussions with a global power like the US. Collaboration in advanced R&D, sharing of new technologies and joint production will be, in Panetta’s own words, “over the long term”. He has acknowledged that moving ahead will require hard work and breaking down bureaucratic hurdles on both sides.

All these developments signify that space now exists for us to play an enhanced international role, which we seek. We are being wooed by the US, at times quite unabashedly, for political, economic and military reasons. The US has taken a more forward looking position on India’s permanent membership of the Security Council, without, however, taking any practical step so far to push for this at the international level. It has committed itself to support India’s membership of the various non-proliferation and technology denial regimes such as the NSG, MTCR etc, but this agenda too is languishing in terms of effort at accomplishing it. The Joint Statement issued at the end of the Strategic Dialogue did not indicate any new initiative in this regard. The US is exhorting India to invigorate its Look East policy. Already a trilateral India-US-Japan political dialogue has been put in place, apart from trilateral naval exercises, a development welcomed in the Joint Statement issued at the end of the Strategic Dialogue in Washington.

This Joint Statement is all-embracing in scope, covering virtually every aspect of the bilateral relationship- political, strategic, security, defence, intelligence, nuclear cooperation, space, trade and investment, energy, science and technology, higher education and empowerment, as noted by Minister Krishna. For Secretary Clinton closer ties between the people, private collaborations, and public-private partnerships is at the center of the Strategic Dialogue, which would explain why issues that can be hardly classified as “strategic” find place on the agenda. Our strategic dialogue with other key countries is much more restricted in scope, focusing primarily on political, security and defence related issues, of bilateral, regional or global interest.

The announcement by Clinton just before the commencement of the strategic dialogue exempting- for 180 days- India from sanctions on the ground that India had diversified its sources of crude imports and reduced oil purchases from Iran as required by US legislation avoided a potentially major political blow to efforts to build a strategic understanding between the two countries. The avoidance of such a step shows nevertheless the fragility of such understanding, as reduced supplies from Iran is the result not of a political decision by India but practical compulsions, but this gave the US a way out from following the pernicious logic of its unilateralist policies.

The road blocks in the way of forging India-US collaboration in civilian nuclear cooperation continue to be a source of disgruntlement for US companies. The scant progress made in this area has been disguised by exaggerating the import of the announcement made to time with the Strategic Dialogue that a MOU had been signed between Westinghouse and the Nuclear Power Corporation of India (NPCIL) committing both sides to negotiate an Early Works Agreement for the preliminary licensing and site development work associated with construction of the new Westinghouse reactors in Gujarat, and the ongoing progress between General Electric-Hitachi and NPCIL on their MOU. The nuclear liability issue remains a problem for the US, as was mentioned in Washington.

Irrespective of whether the subjects discussed, progress in relations noted and projects of future cooperation envisioned can be veritably called “strategic” in content, some highlights of the dialogue in Washington can be identified. Both sides intend consulting with each other with regard to forums like the East Asia Summit, the ASEAN regional Forum and the ASEAN Defence Ministers Meeting Plus. India will support the US bid to become a dialogue partner with the Indian Ocean Rim Association for Regional Cooperation. Both sides-in an allusion to Chinese claims to the South China Sea-affirmed the importance of maritime security, unimpeded commerce, and freedom of navigation, in accordance with international law, and the peaceful settlement of maritime disputes. Significantly, any direct reference to the South China Sea has been avoided, obviousy with Chinese sensitivities in mind, though it is unclear why if other regions can be mentioned there is squeamishness with regard to these waters.

Noting that both countries have signed Strategic Partnership Agreements with Afghanistan, the intention to intensify their consultation, coordination and cooperation to promote a stable, democratic, united, sovereign and prosperous Afghanistan has been expressed in the Joint Statement. On regional connectivity through South and Central Asia, India seems to have desisted from openly endorsing the New Silk Road project proposed the US, with the two sides discussing only the “vision” of enhanced regional connectivity. The two have “reiterated that success in Afghanistan and regional and global security require elimination of safe havens and infrastructure for terrorism and violent extremism in Afghanistan and Pakistan”, a language that Pakistan is bound to have resented. This is half-satisfaction for us though, as safe-havens and the infrastructure of terrorism are mentioned uniquely in the context of Afghanistan and not India.

Cyber-security is now figuring more prominently on the bilateral agenda, with consultations having already begun between the National Security Councils of the two countries. The first bilateral exercise between the respective Computer Emergency Response Teams will be held later this year.

India has requested the US government to permit LNG exports from the US to India. This would be important in terms of India reducing its reliance on the Gulf countries and benefiting from the expansion of natural gas production in the US that will also give the latter considerable energy autonomy and affect the geopolitics of oil trade globally.

While at the governmental level any anti-China dimension to the India-US strategic relationship is pointedly denied, yet it is widely accepted that US overtures to India in general, and especially the encouragement given to it to intensify its ties with Southeast and East Asia, are part of US’s hedging strategy against an inexorably rising China.

The China issue is very complex as China does not merit being treated as a friend by either the US or India as both countries have serious strategic differences with it, and cannot be treated as an adversary either as both countries have productive ties with it in several spheres. In any case, China’s weight in the international system and the degree of its integration with it makes confrontation with it highly costly and liable to fail.

To attenuate negative perceptions, Panetta underlined in Delhi that as the United States and India deepen their defence partnership, both will also seek to strengthen their relations with China. The US, he said, welcomes the rise of a strong, prosperous and a successful China that plays a greater role in global affairs and “respects and enforces the international norms that have governed this region for six decades”- underlining the core aim of America’s new Asia pivot.

If Panetta chose to speak explicitly about the China context of India-US strategic ties, the China factor was side tracked at the strategic dialogue in Washington, with Clinton avoiding any comment on the subject. The subsequent State Department’s briefing was couched in re-assuring terms to the effect that China was discussed but not focused on, that both India and the United States wanted a good, strong engagement with China, and that their strategic partnership was not in way at China’s expense. It was stated that a zero-sum relationship with Beijing would have negative results. dampening the opportunities for a stronger, more prosperous Asia. To further disarm anti-Chinese interpretations, it was added that a trilateral dialogue with China had been mooted, with the hope expressed that it will be agreed to.

The Chinese would undoubtedly pay less attention to what is stated publicly by US and India about the larger strategic thrust in Asia of their developing partnership and more to its underlying implications for China. It cannot be lost on the Chinese that the US intends to be the central player in Asia to which economic, political and military power is shifting at the expense of the trans-Atlantic alliance. While maintaining a relationship of engagement and competition with China, the US would want to draw India to its side as much as it can, not only to have a combination of the world’s foremost power and an Asian power like India with all the potential attributes of China in terms of demographic, geographic, economic and military strength to balance that country, but also to prevent the development of a potential India-China axis, even if it seems unlikely at present.

The Chinese, even as they remain unyieding on core differences with India, do exhibit some concern through commentators and think tanks about an India-US axis in Asia. According to reports, on the day Panetta was in Delhi, the Chinese vice-premier Le Keqiang, who is expected to replace Chinese Premier Wen Jiabao, pledged to Minister Krishna in Beijing to “work together with India to maintain strategic communication, improve political mutual trust, and appropriately address disputes and safeguard the peace and tranquility in border areas to advance the bilateral relationship to a new phase.”

A Chinese analyst from a government sponsored think tank, commenting on Panetta’s wooing of India, has opined that “India was unlikely to get involved in any such containment policy on somebody’s behalf”, noting that India wants to be independent in making its own foreign policy while maximizing its interests. He also underscored that India’s interests lie in wider economic and cultural cooperation with China and spoke of “China’s opportunity to break up the US intention to contain China”. Chinese specialists are noting with satisfaction that both PM Manmohan Singh and Minister Krishna conveyed their reservations about the US “rebalancing” strategy to Panetta. China is pressing through these messages the sensitive points in Indian foreign policy thinking.

In actual fact, Panetta’s explicit statements on incorporating India into its Asia strategy did not evoke any sharp negative reaction in India at the political level, though some cautious, balancing comments were made and briefings given. A Defence Ministry release referred to the need to set up a security architecture in Asia at a pace that would be comfortable to all countries concerned. This could be construed as cautionary advice to the US not to make precipitatory military moves in the region and unduly alarm China. Unless India has consulted other Asian countries and is reflecting a large consensus amongst them that Chinese sensitivities should be kept in view by the US, proffering such advice may suggest that India is not comfortable with the pace the US is moving. Why we should feel concerned about Chinese reaction to security precautions being taken against an assertive China is not clear, especially as China’s strategic policies in our region damage us enormously.

In response to Le Keqiang’s gesture, Minister Krishna reportedly said that the Sino-Indian relationship is one of the most important bilateral relationships in the world, echoing, oddly, what the US Administration has said in the past about its relationship with China.

The US is now making a more realistic projection of its relationship with India even as its wooing of India appears too ardent at times. A confident US is always inclined to push while a diffident India is by nature cautious. Panetta recognized in Delhi that the two countries “may not agree on the solution to every challenge facing us, and we both face the challenge of political gridlock at home that sometimes prohibits advancing our broader strategic objectives”.

Clinton struck a similar note at Washington in remarking that “there is less need today for the dramatic breakthroughs that marked earlier phases, but more need for steady, focused cooperation” and effort to work “through the inevitable differences”. “This kind of weekly, sometimes daily, collaboration is not always glamorous, but it is strategically significant”, she said, adding that she looks at the totality of the relationship rather than denying the existence of differences. According to her, “the strategic fundamentals of our relationship are pushing our two countries’ interests into closer convergence”.

Minister Krishna introduced a note of caution even while playing up to the rhetoric by remarking that the India-US global partnership “could” be one of the most important or defining relationship of the 21st century. He acknowledged that “sometimes there are questions and doubts about the relationship”, but explained that “they are inevitable in something so unique and new”. That India and the US “should” (hedged language again) work towards a close relationship has been settled as a question, the Minister said while warning against complacency. The sense here is that the strategic partnership is work in progress and should not be considered a fait accompli, which is a signal to the US that it has to do more to meet Indian expectations and to other major powers that India is moving at a measured pace with the US.

Broadly speaking, India’s response to US overtures is crafted as well as it can be, as the diplomatic challenge it faces is very complex. India should not appear to be rushing to embrace the US strategy in Asia, though India’s need to put constraints on Chinese ambitions is greater than that of the US. India has less means to deal with these ambitions than the US has. We should not allow ourselves to be put in a position of having to make concessions in the future to ward off the pressures generated from China’s growing strength.

India has to defend its territorial integrity vis a vis China; the US wants simply to retain the upper hand against China. We should therefore establish a basis of cooperation with the US that neither sends a dampening signal to it nor is an enthusiastic endorsement of its strategy.

We should continue our engagement with China bilaterally and in regional and international forums, without forgetting that our real rival is China not the US. If we want to tactically send reassuring signals to China, even as we become partners with the US, we may do so, but what is important is that it should not be done in the belief that we need to equate our relations with the US with those with China as part of preserving our strategic autonomy.

Most of all, we must not take upon ourselves, as we did at Bandung, to do diplomacy on China’s behalf with others and help China appear less of a threat to the others than it actually is. Which is why, statements by us that the security architecture in Asia should move at a pace comfortable to concerned countries make little sense.

Strategic autonomy yes, strategic confusion no!