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)

No First Use Nuclear Doctrine with “Chinese Characteristics”

Dr. Adityanjee

Introduction

Like a chameleon, the dragon, very predictably is changing its colors with regards to its often stated nuclear doctrine of “no first use” (NFU). Since 1964 when China conducted its first nuclear weapon test, China has repeatedly and vociferously insisted that it would not be the first nuclear power to use a tactical or strategic nuclear weapon in pursuit of its strategic objectives. This NFU pledge was explicitly and unconditionally included in each of China’s defense white papers from the first in 1998 through the seventh one in 2011.

Recently, there is some international debate about possible changes in China’s NFU doctrine following publication of China’s biannual 2013 Defense White Paper. However, it appears that China may have moved beyond its so-called NFU doctrine and its duplicitous pledges do not hold any sincere meaning. Strategic deception has been an important part of China’s military DNA since the times of Sun Tzu who wrote in his treatise the Art of War: “All warfare is based on deception. Hence, when we are able to attack, we must seem unable; when using our forces, we must seem inactive; when we are near, we must make the enemy believe we are far away. Since achieving a great economic success and flush with $ 3.4 trillion foreign exchange reserves, China has increased its list of core national issues and has adopted a more belligerent strategic posture and hegemonic attitude towards international community in general and its neighbors in particular. Disregarding the Deng’s advice of lying low and bidding your time, the current (5^th) generation of China’s leaders are adopting aggressive postures militarily though the transformation into visibly hardened strategic claims started really during the reign of the 4th generation leaders (Hu Jintao, Wen Jiabao and Wu Bangguo).

The last time a Chinese paramount leader reaffirmed the so-called NFU pledge was on March 27^th 2012 in Seoul Nuclear Conference when Hu Jintao mentioned it in his address. However, in December 2012, the new 5th generation Chinese paramount leader Xi Jinping failed to mention about the so-called no first use pledge in a speech given to Second Artillery Force of the PLA which manages China’s land-based nuclear weapons. Apparently, he also stated that nuclear weapons create strategic support for China’s status as a major world power. This is a significant departure from the previously stated public positions citing Mao Zedong’s ideas about the use of nuclear weapons as a taboo and labeling the nuclear weapons essentially as “paper tigers”.

Fundamentals of NFU Commitment

Out of the nine countries that possess nuclear weapons currently, only two, China and India had explicitly stated “No First Use” as the guiding principle of their strategic nuclear doctrine.

An absolute and unconditional NFU commitment would have four following components:

1. Not to use nuclear weapons first against countries that possess nuclear weapons
2. Not to threaten use nuclear weapons first against countries that possess nuclear weapons
3. Not to use nuclear weapons first against countries that do not possess nuclear weapons
4. Not to threaten to use nuclear weapons first against countries that do not possess nuclear weapons

NFU policy has been a core feature of the Chinese defense policy having been decided apparently by Chairman Mao himself in 1964. Critics of the Chinese NFU commitment claim that it is completely unverifiable and is mere rhetoric. Self-described “China hawks” in the West have derisively dismissed the Chinese NFU pledge as pure propaganda for the last five decades. Chinese strategists have debated the merits of dropping or altering the NFU policy. This debate was reportedly very intense from mid to late 2000s. There are assertions from Chinese officials that Chinese NFU commitment is not applicable to perceived claims on territories. China has territorial disputes with multiple neighbors including India. Presumably since China continues to claim that Arunachal Pradesh is its own territory, in a hypothetical scenario, it may use tactical nuclear weapons in a war with India in eastern sector because China will consider this use not against any other country but in its own perceived territory. Similarly, China will not be bound by its NFU if the US were to intervene in Taiwan in case of a Sino-Taiwanese war as it considers Taiwan as a renegade province. Chinese NFU is not applicable if it apprehends annihilation of its top leadership by conventional means. Similarly, a conventional attack on strategic target like the Three Gorges Dam would be an exception to the NFU pledge. More recently, Chinese have discussed other possible exceptions from their NFU commitment including a massive precision guided conventional attack on their intercontinental ballistic missile silos or their strategic facilities. As China moves away from minimal credible deterrence to “limited deterrence”, a more sophisticated delivery mechanism and an exponential increase in its nuclear stockpile, it has also moved towards greater flexibility and continued opacity in its nuclear operational doctrine. It is pertinent to say that the so-called Chinese NFU commitment has never been taken seriously by both the US and Russia at any time in their policy matrix.

Chinese Nuclear Arsenal

China can be considered the largest nuclear power after the US and Russia. China’s nuclear capability is apparently stronger than those of the next six nuclear states combined. According to Russian estimates, since early 1960s China has generated 40 tons of enriched weapons grade uranium and 10 tons of plutonium which would be enough to produce 3,600 nuclear war-heads. It is probable that half of this fissile material is kept in stocks whereas the rest half has been used up to produce 1500-1800 warheads, half of which may be in storage. This would leave 800-900 warheads that could be available for operational deployment on various types of delivery vehicles. Therefore, the real motives for China’s complete secrecy about its nuclear forces lie not in their “weakness” and “small size” but in much larger strength of China’s actual nuclear arsenal that is much higher than the commonly cited number of 300-400 warheads by the western analysts. There is also a great degree of international uncertainty about the hundreds of tunnels being built in China as their purpose has not yet been officially explained.

Chinese Nuclear Posture and Track II Interactions

Personal interactions with various Chinese academicians and officials during policy conferences suggest that China will continue to add to its nuclear arsenal and will not participate in any nuclear disarmament program till it reaches a certain level. This analyst has interacted with Professor Shen Dingli, Associate Dean of the Institute of International Studies from Fudan University, Shanghai over the last four years with very consistent and candid answers regarding Chinese national nuclear posture. Professor Shen Dingli claims to have independent (but sometimes more hawkish views) from those of the Chinese Government. In 2009 Carnegie Nuclear Policy Conference in Washington, DC, he expressed absolute ignorance about Chinese proliferation activities and the fact that Chinese weapons designs were turned in by Libya to the International Atomic energy Agency (IAEA) when Libya folded up their clandestine nuclear program. He was totally unaware of China’s both vertical and horizontal proliferation activities as late as April 2009. During the 2009 Carnegie International Non-proliferation Conference, Washington, DC, he agreed that Chinese government will continue to increase its number of nuclear war-heads. In a more recent Carnegie Endowment meeting on India-China dialogue in Washington DC on January 10th 2013, he again reiterated that China will continue to modernize its nuclear arsenals and the delivery systems till a perceived parity is achieved with the two great powers (US and Russia). China will certainly not agree to cut the number of nuclear arsenals as it wants both the US and Russia to implement further reductions in their respective nuclear arsenals.

Interactions with another Chinese academician Dr. Shulong Chu, Professor of Political Science and International Relations at the School of Public Policy and Management and the Deputy Director of the Institute of International Strategic and Development Studies at Tsinghua University in Beijing, China in a session on China-US Strategic Stability on 4/6/2009 during the Carnegie International Non-proliferation Conference, Washington DC revealed very interesting Chinese perspectives. Chu explicitly stated that since China has accepted US supremacy, analogously both India and Japan should accept Chinese supremacy in the Asia-pacific region. China is a bigger country than Japan and India. It has bigger military requirements. Japan, India and other Asian countries should understand that and should be willing to accept China’s ongoing modernization of its military and strategic (read nuclear) assets. Chu further went on saying: “Russia and the US have too many nuclear war-heads. They can afford to have deep cuts. China cannot do that because China has too few. China wants more and its agenda is to have more nuclear weapons”.

Major-General Yao Yunzhu, Director of the Center on China-America Defense Relations of the Chinese Academy of Military Sciences, Beijing in a session on Deterrence, Disarmament and Non-proliferation during the Carnegie International Nuclear Policy Conference, held in Washington, DC on April 8-9th 2013, artfully deflected all the questions on China’s growing number of nuclear arsenals with a cute smile, stating again that the onus for nuclear warhead reduction lies on both US and Russia because China has very limited, small number of nuclear weapons. General Yao while doing routine lip-service to the NFU doctrine explicitly admitted that, "A certain amount of opaqueness is an integral part of China's no-first-use policy". She persistently refused to quantify the number of warheads China needed for a credible and effective nuclear deterrence. She officially expressed Chinese Government‘s serious concern at the US shifting its ballistic missiles interceptors in the Pacific island of Guam to deal with DPRK nuclear threat, thereby degrading the quality of the Chinese nuclear deterrent. She enumerated three essential characteristics for the Chinese nuclear deterrent: it has to be survivable against first strike; it has to be credible enough in numbers and in delivery system, and lastly it has to have an effective and punitive second strike retaliatory capability. She was asked about recent BMD tests by China on January 22nd 2013 and she categorically confirmed that China will, from now on, indeed develop its own BMD system as the US is not willing to commit to cease its BMD system.

Professor Li Bin from the Department of International Relations, Tsinghua University, Beijing and also a Senior Associate at Carnegie Endowment for International Peace in Washington, DC admits formally in his writings that China’s non-proliferation posture has evolved over a period of time and now is an important and essential part of its nuclear theology. However, in private discussions he passionately justified Chinese horizontal proliferation activities outside the scope of the Nuclear Suppliers Group by providing Chashma-3 and Chashma-4 nuclear plants to Pakistan on grounds that China had helped India also with nuclear fuel supplies for the Tarapore Atomic Reactor when India was under the US nuclear embargo. He assertively implied that China will continue to provide nuclear materials and technology to its all-weather friend Pakistan analogous to US-India civil nuclear deal though the latter deal was approved by the NSG. Interestingly a younger researcher Zhu Jianyu from the Center for Strategic Studies of the China Academy of Engineering Physics during the Carnegie International Nuclear Policy Conference, held in Washington, DC on April 8-9th 2013 candidly admitted that Chinese press and academicians usually toe the government line because the government controls their funding and hence independent viewpoints are not possible.

In private discussions with Major General Yao, it became quite clear that China will now vigorously pursue development of its national ballistic missile defense system; something which China had vociferously denounced earlier. She also stated that China will continue to develop its ASAT weapons till a legally binding multi-lateral treaty banning weaponization of the space is signed and ratified. Major General Yao attributed to and categorically linked this shift in Chinese strategic thinking to the recent US decision to deploy 14 long-range ballistic missile interceptor batteries in the Pacific Island of Guam ostensibly in response to threats posed by the DPRK thereby potentially degrading the Chinese nuclear deterrent. Changes in the Chinese nuclear posture are also linked to the US development and deployment of advanced precision guided conventional warheads in the Asian theatre capable of destroying Chinese multiple independently targetable re-entry vehicles (MIRV) ballistic missile silos thereby degrading the Chinese minimum nuclear deterrent. China is focused on modernizing and its strategic survivability and beefing up its effective second strike capability and therefore will continue to develop more nuclear warheads and will keep its nuclear capabilities fully opaque.

China’s 2013 Defence White Paper

For the first time, the 2013 edition of China’s defense white paper entitled: “Diversified Employment of China’s Armed Forces” conspicuously fails to mention re-adherence to and re-affirmation of China’s often-stated “No first use pledge”. This is significant departure from the 2011 version of China’s Defense White Paper. The absolutely deafening silence in the 2013 version on NFU is deliberate and is very significant for its reverberating eloquence. The new white paper introduces ambiguity as it endorses the use of nuclear weapons in response to a nuclear attack but does not rule out other uses. In the last few years, Chinese analysts and officials have done an excellent job of qualifying the original Chinese “NFU” pledge with myriads of qualitative exceptions so as to render it effectively meaningless. This carefully contrived departure is strategically significant for the international community.

Following a vigorous international debate on China’s departure from the NFU policy, Major General Yao floated a trial balloon in an op-ed piece in Asia Times Online on April 24^th 2013 when she called for a legally binding multi-lateral NFU agreement. She wrote a point by point rejoinder while still defending the reasons as to why China should depart from the often stated NFU policy and acknowledged that domestic discussions happening in China regarding junking the NFU policy. She has tried to invoke new exceptions to China’s so-called NFU commitment linking it to a new US law (2013 National Defense Authorization Act) that seeks a report from the Commander of the US Strategic Command by August 15^th 2013 to describe the Chinese underground tunnel networks and to review the US capability to neutralize such networks with conventional and nuclear forces. Ostensibly, with a view to creating more confusion and more opaqueness about China’s intentions, she explicitly states: “To alleviate China's concerns, a constructive approach would be to assure the policy through nuclear policy dialogues, to establish a multilateral NFU agreement among all the nuclear weapon states, and to consider limiting or even prohibiting the use of nuclear weapons in a legally binding international agreement.” Li Bin, in bilateral context, has previously suggested that India and China should begin their nuclear engagement with mutual reassurance of NFU and should work together in advocating NFU in global nuclear disarmament and non-proliferation efforts.

China very well knows such a legally binding international agreement will not be negotiated for several decades owing to US dogmatic postures. The US is already spending $10 billion to upgrade its nuclear weapons despite Obama’s initial call for a global zero goal. This gives a window of opportunity for China to increase its nuclear warheads exponentially while keeping its so-called NFU pledge under suspended animation and even junk it de facto. Interestingly, China refuses to enter into an official government to government nuclear weapons dialogue with India on the grounds that India is non-signatory to the NPT. At the same time, China has shrewdly refused to engage in bilateral dialogue with the US on nuclear arms reductions on grounds of asymmetry of nuclear forces of respective countries. China does complain of discrimination and nuclear asymmetry while discussing US-China relations but fails to address genuine Indian concerns on similar grounds.

Implications for India

Western debate on the perceptible change in Chinese nuclear posture has focussed only on its narrow impact on the strategic environment of the US and its allies including Japan. India should not behave like an ostrich burying its head in the sand. Perhaps, time has come for India to review her own strategic nuclear doctrine revising the no-first use pledge. Robust evidence has come cumulatively over a period of time from multiple sources reflecting the new nuclear reality in our neighborhood. Totality of the evidence available convinces this analyst that China has indeed changed its nuclear posture from defensive to offensive and is on a large-scale nuclear build-up. China is indeed willing to consider first strike capability to preserve its core national issues though vehemently denying such intentions at the moment. Predictably, China will continue to obfuscate this change in nuclear posture using ambiguous, turgid and opaque language while simultaneously blaming the US for failing to negotiate a legally binding multi-lateral agreement on NFU. Indeed, this gives the dragon a fig-leaf of deniability. Certainly, India should not countenance being the only nuclear weapon state pledging “no first use” while the global nuclear posturing has become indeed hardened. One has to take into factor Pakistan’s accelerated development of tactical nuclear weapons and its stringent refusal to negotiate and sign a multi-lateral Fissile Materials Cut-Off Treaty (FMCT) and continued Chinese help to Pakistan in and outside the NSG. While Pakistan has never subscribed to an NFU commitment and its nuclear arsenal is specifically India-centric; the recent change in China’s nuclear posture is definitely of concern to India. The writing is on the wall as China does not have good track record of strategic comfort and reliability vis-a-vis India. The current incidence of Chinese incursion into Indian territory in Daulat Beg Oldie region in the Ladakh sector should be an eye-opener. While India must focus on its economic, infrastructure and social development and must not waste her meager fiscal resources in a costly nuclear race, she needs to be prepared for all strategic options. Given the aggressive behavior of China in recent years appropriate and credible policies need to be adopted including having a re-look at evolving nuclear posture of China.

Energy Security of India- Need for A Fresh Approach

Maj Gen (Retd.) A K Chaturvedi

Energy an Indicator of Growth and a Measure of Comprehensive National Power

Energy is an important ingredient for accelerating development because its consumption pattern is the measure of the growth of a nation. Its availability/ lack of it, is also an important element in the measurement of a country’s the comprehensive national power. To have a quick reality check, as on date, India’s per capita energy consumption is as low as 700 kWh while the world average is 2,500 kWh and for many of the developed countries the figure is as high as 15,000 kWh.¹

Indian Scenario²

The demand for energy world over has been rising steadily since 1970 and the major contributors to this rise are growing economies like India and China. It is only nuclear energy whose demand is not growing, essentially due to plateau in demand of the developed countries and growing economies getting subjected to the restrictive regimes like NPT. Rise in demand can be explained as too many claimants for the same pie with attended implications.

Source: Energy Information Administration (EIA), International Energy Outlook-1999.

India’s energy consumption is growing at the rate of 5% per year. ³ Presently, of this demand, 40% is oil and natural gas, which is projected to grow to 45% but the domestic production, is likely to remain stagnant at 32 million tons. Such a state calls for heavy dependence on import (in excess of 80% of the demand) resulting into heavy drain on foreign exchange.

One of the major dilemmas for India is that adequate resources (petroleum) are not available for commercially viable technologies and the resources that it has (Thorium, renewable and gas hydrates to name a few) technologies have yet to mature.

Challenges in Indian Context⁴- India has experienced dramatic economic growth over the past decade, with a GDP growth of around 6% annually since the early 1990’s and peak GDP growth of 8% in 2005-6. However non availability of assured electrical power, when and where needed, is likely to have an impact on future economic growth. Some of the challenges are:-

• Affordability of the cost of energy by the weaker sections of the society.
• Unreliable energy distribution system and effect of energy theft (about 40%) on the supply.
• Use of inefficient traditional energy resources like cow dung and wood in large parts of rural India, which cause health problems to women folks in villages.
• Need of growing personal transportation segment (rate of yearly growth 16% since 2001) which needs scarce petroleum products.
• Restrictive international regimes for energy resources and effect on supply due to needs of other growing economies like China.

Appraisal of Energy Bearing Resources in India

Resource Richness of India - Although, India is well endowed with natural resources, there is deficiency of energy in the required form to meet its developmental needs. Some of the resources unique to India are: wind energy in a number of coastal, desert and mountainous locations; warm waters of her seas have a scope for exploitation of maritime resources; sun’s intensity is one of the highest in the world, which has potential to meet a major portion of her energy demand; high temperature and high humidity in a large part of the country lends itself for biomass conversion; coal reserve which is one of the largest in the world (adequate for next 200 years at the present rate of consumption); large number of rivers collectively have a very substantial potential for hydroelectric energy conversion and a very large reserve of Thorium has potential to produce nuclear energy. Prospected Natural gas though not in abundance but is not too less either.

The Present Energy Mix of India⁵

Source Wise Energy Utilisation ⁶

As is evident from the graph, the energy mix is dominated by coal-fired systems to the extent of 75%. Presently nine numbers of 4000 MW coal fired power plants are under construction and are likely to be completed in next five years. Coal Sector needs major investments for extraction and transportation and high ash content of Indian coal needs to be addressed by leveraging technology. There is also a need to diversify the sources of electrical generation keeping in view the projected demand for electricity in the medium and long terms.

Energy Policy - In 1997 the parliament committee on energy had emphasized that the major issues in the energy sector are; the absence of an integrated energy policy; inefficiencies in energy supply and utilisation, an unsustainable energy mix; acute scarcity of developmental capital; a lack of rational energy pricing; inefficient environmental consideration and a host of other related issues. It has been planned; to encourage private sector to invest in transmission of power and for improving the distribution. ⁷

Need To Review Energy Mix - India has to choose its own mix and proceed accordingly to create necessary infrastructure to utilise that. A practical approach would be to exploit optimally all available resources by leveraging technology and under the concept of ‘local use with provision for transfer of surplus power generated’.

Need for Research and Development (R & D) - With the rapid advances in the field of technology and many of the commercially viable resources being finite in nature a robust Research and Development infrastructure is absolutely essential to keep exploring newer areas of resources for their technical feasibility and developing the necessary economically sustainable technology to exploit them. Other areas which need R&D are transmission, storage and technical systems and procedures to ensure inter-changeability from one source to the other source.

Optimisation of Resources⁸

Remote Power Generation - This is important in India as many rural locations lack regular access to grid power and local population has to depend on local resources. In 2004, 69% of India’s population relied on biomass for cooking.

Transportation Sector- There have been some moves by a number of companies to introduce battery-powered bikes (e.g. Ultra Motors, who have produced over 100,000 units in two years). The power requirements of bikes and scooters is being planned to be met by the Direct Methanol Fuel Cells (DMFCs) or hydrogen-powered Proton Exchange Membrane (PEM) fuel cells. The large potential market for fuel cells in India raises the prospect for significant economies of scale in the commercialisation of the fuel cells. As far as future is concerned, eventually, plans are afoot to move away from CNG to the use of hydrogen in internal combustion engines, and eventually to install fuel cells. Also there is a plan, to make all government vehicles run on CNG, again as a preliminary to establish an all-hydrogen fleet. A project for the introduction of hydrogen- CNG blends on a trial basis in existing CNG vehicles is currently in the planning stage. Indian railways have plans to build a hydrogen fuel cell powered train. In both public and personal transport, some preliminary activities are on-going in hydrogen/fuel cell development.

Role of Conservation in Demand Management- While, it is important to enhance the availability of the energy but equally important is to do conservation to ensure optimal utilisation of available resources, reduction of wastages, maximisation of passive means to reduce the demand. Such an approach will entail recycling and co-generation in Industry across the board. For habitat; addressing aspects like orientation/ design of buildings, use of materials which lent themselves for energy conservation/ recycling of energy, rain water harvesting to reduce the energy consumption on pumping effort, afforestation which helps in reducing need for air conditioning effort, exploiting energy from kitchen waste and finally use of standard equipment for energy conversion is required.

Economics of Power Production - A KPMG report in 2007 said that India needed to spend US$ 120-150 billion on power infrastructure over the next five years, including transmission and distribution (T&D). It said that T&D losses were some 30-40%, worth more than $6 billion per year. A national average of 27% T&D loss is well above the target 15% set in 2001. In 2006 almost US$ 9 billion was committed for power projects, including 9.35 Giga Watt electricity (GWe) of new generating capacity, taking forward projects to 43.6 GWe and US$ 51 billion. At the end of 2011, 180 GWe was on line. The government's 12th 5-year plan for 2012-17 is targeting the addition of 100 GWe. The International Energy Agency (IEA) estimates that India needs an investment of at least $ 135 billion to provide universal access of electricity to its population.

Options for India to Enhance Energy Supply

Oil and Gas - For the scarce resources India’s biggest competitor is China. India will have to do some very deft strategic and diplomatic moves in the international arena to increase the availability of energy. Some of the options are as follows:-

• International Pipelines - There are two pipes namely; Turkmenistan-Afghanistan-Pakistan-India and another Iran-Pakistan-India are on the anvil.
• Transportation of Natural Gas - needs heavy investment for creating infrastructure on both ends for liquefaction and re-gasification.
• Interdependence- India needs to develop interdependence with the littoral countries of the Persian Gulf to ensure uninterrupted supply.⁹
• Need to Establish Equation with Turkey - With a view to exploit Caspian Basin which is estimated to be having 16-18 billion barrels of oil.

Establishment of Strategic Reserve - Planned infrastructure for a capacity of five million tons spread over three locations needs to be expedited.

Acquisition of Energy Equity Overseas - with arrangements for their security in location and during transit.

• Need to Diversify Energy Mix - from fossil fuel to other sources like; renewable, hydro, bio based fuels and nuclear. For hydro energy cooperation with Nepal and Bhutan is absolutely essential and emphasis needs to shift from Mega projects to small hydro projects.
• Development of a Logistic Network - with in the country to cater for movement, storage and supply chain management.
• Need for an Integrated Energy Policy - India, with its region specific diversity of resources, needs a policy which addresses following:-

Energy be declared a strategic asset and all out efforts; technical and diplomatic be made to ensure its continued availability at all times.

Optimum utilisation of all the possible resources like waste, geothermal, sea based.

Transfer of energy from energy surplus areas to energy deficient areas and utilisation of energy resources locally as far as possible.

Energy to be an important subset of the foreign policy.

Establishment of an inter-ministerial mechanism with due linkage with industry to scout and procure energy bearing properties abroad and address related issues.

Energy pricing, demand/supply management be market driven rather than government administered.

• Strong Emphasis on R&D - to exploit clean coal technologies, gas hydrates, Hydrogen and fuel cells and other frontier technologies. Extra efforts are needed to reach maturity of technology so far as breeder reactors are concerned. In a planned manner use of blending of petroleum products.
• Indigenous Capacity Build-up - for training; industrial base and management skill pool.
• Need to address ratings of equipment, systems integration, losses in the distribution network, improvement of infrastructure with adequate redundancy.