August 2007, Vol. 2, No. 8

Feature: Text of U.S.-India Nuclear Deal Released

U.S.-India Nuclear DealAfter two years in the making, the U.S.-India nuclear deal text, known as the 123 agreement, was released on August 3, provoking debate about Indian foreign dependence, relations with the U.S., and the balance of power in South Asia.

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In this Issue:
  1. Feature
    U.S.-India nuclear deal text released

  2. Carnegie Analysis/Events
    Fatemi on Pakistani Politics after Lal Masjid; Tellis and Squassoni on the U.S.-India nulcear deal

  3. Views from South Asia:

    Foreign Policy and Domestic Politics

    Naxalite unrest; India’s home-grown terrorists, real and alleged; the Nagaland peace process; India and non-alignment

    Economics and Energy
    Development and displacement; anarchic labor laws; monetary policy gymnastics

    Emergency fake-out; Lal Masjid; the Chief Justice’s reinstatement; Musharraf’s dismal prospects; the All-Parties Conference; electoral fraud

    Curbing corruption; foreign aid; the Bangladesh-Myanmar-China road deal

    The peace process; Nepal’s giant neighbors

    Winning the peace

  4. In-Depth Analysis
    Neoliberal reforms and the Indian government; understanding farmer suicides; Sino-Indian relations

  5. Additional Resources
    U.S.-India nulear agreement full text and summary


Editor's Note
This month in South Asia saw two major developments. First, the text of the U.S.-India nuclear deal was released on August 3. See feature.

Second, Pakistan’s political crisis deepened, provoking intense and sometimes hopeful speculation about the future of democracy in Pakistan. The government finally put an end to the siege of Lal Masjid, a mosque which had been occupied by Islamic militants since the August 4.

But Islamabad was rocked by violence yet again, as suicide bombings accompanied the mosque’s reopening on July 26, as if to signify that Musharraf and his government aren't out of the woods yet. Musharraf’s regime offered other signs of weakening as well. After sacking the Chief Justice of the Supreme Court, Musharraf yielded to popular and political pressure and reinstated him. But doubts remain as to whether this fall’s elections in Pakistan can bring meaningful political change. Allegations of voter registration fraud are widespread, with voter rolls missing as many as 40 percent of voters. And Musharraf recently announced that he was considering announcing a state of emergency of Pakistan, which would delay elections for up to a year. Meanwhile, the All Parties Conference held in London showed an energized but deeply fragmented opposition. We give lengthened coverage to Pakistan this month to address the political turmoil currently taking place.

Sam McCormally
Editor, South Asian Perspectives

Feature: U.S.-India Nuclear Deal
U.S.-India Nuclear Deal Text Released
SinghAfter two years in the making, the U.S.-India nuclear deal text, known as the 123 agreement, was released on August 3, provoking debate about Indian foreign dependence, relations with the U.S., and the balance of power in South Asia. Links to the full text and a summary of the agreement are provided in our Additional Resources section.

An editorial in The Hindustan Times lauds the 123 agreement for bringing “the end of nuclear discrimination,” by eradicating India's tough choice between “a legitimate civilian nuclear power programme, complete with international technology and fuel” and nuclear weapons. If the deal goes through, however, India can have its cake and eat it too. (The Hindustan Times, August 5, 2007).

The Hindu
reemphasized its endorsement deal, but offers a cautionary note. India, “must not allow the 123 to become new leverage to pull India deeper into the U.S. strategic embrace, especially in the military and political spheres,” writes the editorial board. (The Hindu, August 6, 2007).

But for many commentators, the costs of the deal outweigh the benefits. A. Gopalakrishnan, former chairman of the Atomic Energy Regulatory Board of the government of India, warns Indians that provisions in the Hyde Act, which permit the U.S. government to terminate shipment of nuclear fuel by the U.S. or any other nation under a variety of circumstances, leave India vulnerable to nuclear fuel shortages and foreign dependence. “Events like U.S. displeasure at our close and continuing cooperation with Iran…could possibly escalate and lead to temporary or longer disruptions of nuclear fuel supply,” he writes. (The Asian Age, August 4, 2007).

Former Secretary in the Indian Ministry of External Affairs Rajiv Sikri echoes A. Gopalakrishnan's sentiments, arguing that India's relations with Iran are more important than nuclear energy, and that therefore India ought to abandon the agreement. (The Asian Age, August 3, 2007).

The 123 agreement also provoked discussion about broader U.S.-India relations. Nayan Chanda describes the shift in U.S. policy towards India, from “treating New Delhi as nuclear pariah to embracing it as a "responsible" member of the international atomic club” and providing it with nuclear technology. Chanda predicts that passage of the 123 agreement, “would likely lead to increased defense cooperation and sales of U.S. military technology.” (Outlook India, August 2, 2007).

Bhartendu Kumar Singh examines the way in which the U.S.-India civil nuclear deal is reshaping the balance of power in South Asia, and worries that a full-fledged strategic partnership between India and the U.S. might impede Sino-Indian relations, which are so crucial to Asian peace and security. (IPCS Article 2343, July 31, 2007).

But not to worry, Subhash Kapila thinks that a strategic partnership is unlikely, and describes the three pressures working against full-fledged U.S.-India cooperation: India's nationalistic middle class, its military dependence on Russia, and the likelihood that such a strategic partnership will result in increased cooperation between China and Pakistan. (SAAG Paper No. 2320, August 2, 2007).

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Carnegie Analysis/Events
Pakistani Politics After Lal Masjid
FatemiThe Supreme Court’s decision to reinstate the Chief Justice was “a tremendous uplifting of the soul of Pakistan,” a decision which has galvanized nearly all segments of civil society to call for governmental reform, former Pakistani Ambassador Tariq Fatemi said in an address at the Carnegie Endowment on August 9. That decision, he said, along with the government’s botched response to the Lal Masjid crisis, have made Musharraf’s future uncertain, and democracy in Pakistan a genuine possibility.

Fatemi staunchly opposed the terms of conditionality recently approved by the U.S. Congress, which tie military aid to Pakistan’s performance in the war on terror, calling such stipulations “demeaning” and “counter-productive.” Pakistan’s commitment to rooting out militants in the border territories will increase “when the Pakistanis are convinced that it is to their advantage to pursue the war on terror with the required degree of commitment,” he insisted.

For this reason, Fatemi argued, a representative government with popular legitimacy and credibility, would be in the long-term interests of the U.S. as well as the Pakistani people. Fatemi dismissed concerns that anti-American sentiment in Pakistan would inhibit the degree of cooperation in anti-terror operations, since “most of the mainstream parties in Pakistan are as committed to the war on terror.” In addition, he said, a civilian government would be more successful in combating the perception that “the war on terror has become an endless saga of American pressures and demands,” a view which, according to Fatemi, is gaining popularity. Read the transcript.

U.S.-India Nuclear Deal
Singh and BushThe U.S. and India announced the completion of negotiations on the Indo-U.S. nuclear deal on July 27. Carnegie Senior Associate Ashley J. Tellis has been recognized as one of the core group who made the U.S.-India nuclear deal possible. A Indian Express article outlines the individuals and crucial moments that provided the political climate for the two countries to reach an agreement.

Indo-U.S. Nuclear Deal Is a High-Stakes Gamble, India Abroad, July 2007
Atoms for War? U.S.-Indian Civilian Nuclear Cooperation and India's Nuclear Arsenal, Carnegie Report, June 2006

A Different VIew:
Power Failure
In The New Republic Online, Carnegie's Sharon Squassoni comments on the recently completed negotiations for the U.S.-India nuclear agreement. She writes, "Unfortunately, the concessions made by the United States at the end of the process may damage the Bush administration's broader efforts to rein in nuclear proliferation.... A nuclear cooperation agreement is one thing, but giving India the nuclear jewels is another."

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Views from South Asia

INDIA - Foreign Policy and Domestic Politics
India soldiersNaxalite Unrest
Reintensified Naxalite activity has led to a flurry of discussion about how best to deal with the Maoist rebels, who have extended their activity to five states. Prem Shankar Jha blames the surging popularity of Maoist rebels among India's poorest on “development fever.” State governments, caught up in the euphoria of 9 percent growth, “ have become increasingly insensitive to the plight of the losers from economic development.” (The Hindustan Times, July 27, 2007).

Panelists who participated in the seminar, “Naxalism and Internal Security in India,” describe the extent and type of strikes by and against Naxalite groups, and report that “poverty and lack of education were the traditional causes of this extremism but the recent attacks…highlight ideological commitment as an equally important cause.” The panelists concluded that Naxalist unrest is, “a socioeconomic problem, and hence cannot be solved by any military solution.” (IPCS Article 2346, August 4, 2007).

India's Home-Grown Terrorists, Real…
Kafeel Ahmed's involvement in the planned attacks on Glasgow Airport have led many India commentators to call for intensified anti-terror efforts. But Praful Bidwai argues, “The inconvenient truth is that Indian leaders and the media largely chose to ignore the indigenous origins of many recent episodes of terrorist violence, rooted in the communalisation of society and politics, the growing demonisation of Muslims, their butchery in Gujarat, and the state's abject failure to bring the culprits of communal violence to book.” (Frontline, July 14, 2007).

Harish Khare hears communalism in the opposition parties' insistence that the UPA is “soft on terror,” and “a note of glee that Bangalore's two Ahmed brothers have spoiled our carefully presented tableau of a plural order.” Politicians must move beyond political posturing to concrete anti-terror policies, he writes. (The Hindu, July 18, 2007).

Haneef…and Alleged
On July 4, Mohammed Haneef, an Indian Muslim, was arrested by Australian authorities who suspected him of terrorism, and held for three weeks without charges, until a leak revealed gaping holes in the government's case. Haneef returned to India on July 29. The debacle led Fyyaz Shahnoor to write, “as more and more power is given to law enforcement agencies to counter terrorism, Western democracies also need to setup watchdogs and safeguards to prevent deceitful practices becoming inherent in the system.” (New Age, July 26, 2007).

The Nagaland Peace Process
As negotiators from the government of India and the Naga groups sit down to resume the peace process that began with a 1997 cease fire, The Hindu advises the government to fulfill what it calls, “the legitimate Naga aspirations for self-administering opportunities and development,” but insists that Naga “demands for ‘sovereignty,' which spell separatism, cannot even be put on the table.” (The Hindu, July 30, 2007).

India and Non-Alignment
G. Parthasarathy describes India's history of nonalignment not in terms of sweeping idealism, but as a pragmatic strategy to enjoy support of both the U.S. and USSR. The Non-Aligned Movement may be defunct, but “non-alignment is relevant even today and really means the freedom to choose a wide range of partners to cooperate with on different issues, to protect our national interests.” (The Pioneer, July 28, 2007).

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INDIA - Economics

India Development and Displacement
“The first thing to be said about displacement,” argues Ramaswamy RIyer, “is that it is ordinarily unacceptable.” But between 10 and 40 million people have been displaced by development projects in India, and the draft of the National Rehabilitation Policy 2006 neither adequately protects the rights of potential victims of displacement, nor provides a reasonable rehabilitation package. (Economic and Political Weekly, July 28, 2007).

Anarchic Labor Laws
“India's archaic labor laws stand in the way” of economic growth and the elimination of poverty, says the Times of India. Opposing the burdensome bureaucratic hoops large employers must jump through to fire workers, they write, “Modernized labor laws should allow companies to lay off workers without reference to any government tribunal, while facilitating generous compensation packages” (Times of India, August 6, 2007).

Monetary Policy Gymnastics
Ila Patnaik describes the Reserve Bank of India's tricky task: confronting the “impossible trinity” of sharp appreciation of the rupee, high inflation, and sharply rising interest rates (Indian Express, August 6, 2007).

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Musharraf Emergency Fake-Out
It's a good thing that Pakistani President Musharraf decided against imposing a state of emergency, says on editorial in Dawn. A declaration of emergency would have to be approved by parliament and evaluated by the supreme court. And if those bodies found the emergency to be unwarranted, Musharraf would have found himself in a bigger pickle than he is already in. “The way out is not an Emergency but free and fair general elections that return the mandate to the people to whom it belongs” (Dawn, August 10, 2007).

Lal Masjid

Haider Nizamani sees the roots of Lal Masjid in Pakistan's past support for the Taliban and other militant groups. “The privatized proxy war fought by militarily well-trained and ideologically charged jihadis did not end with the collapse of the Soviet Union,” he writes, noting the proliferation of radical madrassas across Pakistan. (Daily Times, July 13, 2007).

The Chief Justice's Reinstatement
On March 4, Musharraf fired the Chief Justice of the Supreme Court. On July 20, the Supreme Court demanded his reinstatement. Remarkably, Musharraf obliged. If the Chief Justice's sacking was a “frontal assault on the independence of the judiciary, ”the unanimous ruling reinstating the Chief Justice, and Musharraf's obedience to that ruling, signal to Dawn that the judiciary has “finally come of age” (Dawn, July 21, 2007).

Musharraf's Dismal Prospects, Pakistan's Hope
A. Rehman argues that in his botching of the Lal Masjid siege, his failure to respond to the needs of flood victims, and his unconstitutional sacking of the Chief Justice, Musharraf's regime has recklessly squandered the Pakistani government's legitimacy and credibility, especially in liberal and moderate circles. A democratic government is the only way to address the nation's challenges (Dawn, July 26, 2007). Hasan Askari Rizvi agrees, and argues that Musharraf's missteps in the past month have “[undermined] his capacity to mobilize support for his policies” (Daily Times, July 22, 2007).

Describing the tremendous political significance of Pakistan's “summer of discontent,” Ambassador Tariq Fatemi notes, "it is only an elected civilian democratic dispensation that will have the legitimacy to help forge a national consensus...making Pakistan a credible partner in the global war on terror and the credibility to arrest fissiparous tendencies that threaten to tear the country apart" (Dawn, July 14, 2007).

Fazal-ur-Rehman at APC The All-Parties Conference
Agreements reached from the London APC are problematic if this temporary alliance forces parties to "abandon the outlooks associated with these parties, on the basis of which we cast our votes,” argues an editorial. "Once General Musharraf is gone, they look forward to a very harsh contest for power in the country..[It is] when they think of this contest that their “unity” falls apart." (Daily Times, July 28, 2007).

Although "the All Parties Conference in London was an impressive political show," Rasul Bakhsh Rais has some reservations about the future of democracy in Pakistan. “What makes me a bit pessimistic about all the opposition parties sticking together or even being on the same page is their leaders' immediate interest in coming into power by aligning themselves with the establishment,” he writes. "A civil society movement, with long-term struggle in mind ...would be more substantial than the fuzzy pronouncements of political parties unlikely to stay in the same fold on any issue that matters" (Daily Times, July 10, 2007).

No politician has cozied up to President Musharraf like Benazir Bhutto, whose recent meeting with the embattled leader demonstrates that she “needs General Musharraf's help to achieve his twin objectives and she needs him to quash the corruption cases against her and enable her to become prime minister again." (Daily Times, July 29, 2007).

Electoral Fraud
“About 40 percent eligible voters are missing from the draft rolls,” declares Sarwar Bari, casting doubt on the legitimacy of the upcoming elections (Dawn, July 8, 2007).

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Bangladesh soldiersCurbing Corruption
While some have charged that the Bangladhesi military's anti-corruption campaign has been nothing more lasting than an extravagant piece of political theater, Huhammed Nurul Huda argues, “since in pre-January 2007 Bangladesh there was no noticeable political will to curb corruption and as a large part of the establishment itself went headlong into corrupt acts, it serves a purpose if the anti-graft drive has the attention-drawing element of an event.” But Huda agrees that major cultural and institutional change is needed to rid the government of corruption in the long term (The Daily Star, August 4, 2007).

But will the anti-graft measures go far enough? The military interim government that ousted Bangladesh's two ruling parties in the name of cleaning out corruption isn't squeaky clean itself. Bibhu Prasad Routray says, “the interim administration is replacing the existing system of parliamentary democracy with one in which the primacy of the men in uniform would be second to none” (Outlook India, August 3, 2007).  

Foreign Aid
“Bangladesh has got an aid addiction,” writes A.N.M. Nurul Haque, who notes several startling statistics; of the $44.83 billion that Bangladesh has received since 1972, much of it low quality, as little as “25 percent of aid goes to the target groups while 75 percent is siphoned off” by foreign consultants and government officials (The Daily Star, July 29, 2007)

The Bangladesh-Myanmar-China Road Deal

A.N.M. Nurul Haque praises the Bangladesh-Myanmar-China road deal as a “landmark development” that opens up a range of possibilities for economic cooperation, including utilization of Myanamars large tracts of uncultivated land (The Daily Star, August 5, 2007).

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RayamajhiThe Peace Process
In a recent interview by Sanjaya Dhakal, Andrew Arato addresses timely issues such as the development of the peace process and the nation's constitution (, July 11, 2007).  

Sanjaya Dhakal argues that "the inordinate delay" of the Rayamajhi Commission report has merely invited "questions over its intentions..[and] shrouded the report in controversy" (, August 4, 2007).

Som P. Pudasaini notes that the "arms management process is at a crucial stage of verification of Maoist combatants" as the United Nations Mission in Nepal and the Maoists have different interpretations of how this task should be completed (,  July 23, 2007).

Nepal's Giant Neighbors
Keshab Poudel acknowledges the merits of India and China's offerings but also stresses that the "instability and violence in southern Nepal bordering with India shows that there is a long way to go before the regional powers come to terms benefiting Nepal"  (, August 4, 2007).

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Sri Lanka MilitaryWinning the peace
Commentators agree that the real challenges faced by Sri Lanka aren't military ones. A Daily Mirror editorial argues that after the Sri Lankan government's triumph at Thoppigala, it is critical for "the rule of law be restored" to ensure the success of other governmental plans such as local elections (Daily Mirror, July 17, 2007).  

Jehan Perera notes that the government's military victory at Thoppigala and the recapture of the east “has given a temporary respite to the government" but stresses that "the best hope of ...achieving the basis for a political solution today is for the Sri Lankan polity, including civil society, to seek the re-invigoration of the All Party Conference process aimed at generating the framework of a lasting political solution" (Daily Mirror, July 24, 2007).

Asanga Welikala sees the central challenge of nation building to be the forging of a unitary national identity to which all citizens can subscribe, a difficult task for Sri Lanka, a country in the midst of an entrenched ethnic conflict. In order for all Sri Lankans to feel represented by a collective government, he argues, “traditional liberalism's central principle of individualism needs reinterpretation in a way that accommodates intermediate ties of collective loyalty such as ethnicity,” and would-be nation builders much “contemplate a multinational confederation” rather than a fully centralized or federal government (Tamil Guardian, July 18, 2007). 

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In-Depth Analysis
Neoliberal Reforms and Democracy in India, Economic and Political Weekly, August 4, 2007

Farmers' Indebtedness and Suicides: Impact of Trade Liberalization in Kerala, Economic and Political Weekly, August 4, 2007

Sino-Indian Relations: 20th Century Borders for Stable 21st Century Relations, IPCS Issue Brief No.49 July 2007

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Additional Resources
IPCS Strategic Review: South Asia in August 2007

IPCS Strategic Review: South Asia in July 2007

Visit of External Affairs Minister Shri Pranab Mukherjee to Manila for East Asia Summit Foreign Ministers, ASEAN Post Conference Ministerial, Mekong Ganga Cooperation Ministerial and 14th ASEAN Regional Forum meetings, July 30, 2007

Text of the 123 Agreement, August 3, 2007

Fact Sheet on the India U.S. Civil Nuclear Energy Co-operation: Conclusion of the ‘123' Agreement, July 27, 2007

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Editorial Staff

Sam McCormally, junior fellow, South Asia Program, Carnegie Endowment

Gretchen Smith, program assistant, South Asia Program, Carnegie Endowment

Carnegie Endowment for International Peace
1779 Massachusetts Avenue, NW
Washington, DC 20005
Ph: 202-939-2306

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