Last week the United States and India concluded arrangements that permit India to reprocess spent nuclear fuel as part of their bilateral nuclear cooperation agreement which entered into force in 2008. The agreement over terms of reprocessing by India removes one of the final hurdles to nuclear trade between the two countries.

In a Q&A, Mark Hibbs assesses the importance of the reprocessing agreement and concludes that the landmark U.S.–India nuclear deal damaged the global nonproliferation regime and has exacerbated nuclear tensions in South Asia. “In the aftermath of the U.S.–India agreement, India in the future may not be worried about international sanctions should it decide to resume nuclear testing,” he contends. Furthermore, “Pakistan is now poised to embark on a significant nuclear military buildup.”


What is the civilian nuclear deal between the United States and India? What’s the significance of the agreement?

In July 2005, the United States and India agreed on a roadmap to lift global nuclear trade restrictions on India. Since India tested a nuclear explosive in 1974, it was subject to sanctions because it refused to join the Nuclear Non-Proliferation Treaty (NPT) and does not permit the International Atomic Energy Agency (IAEA) to inspect all its nuclear facilities.

In October 2008, India and the United States signed a bilateral nuclear cooperation agreement. It entered into force two months later, following a decision by the Nuclear Suppliers Group (NSG)—comprised of 46 advanced NPT states which set the rules for global nuclear commerce—to exempt India from its trade restrictions. Until then, NPT states had denied access to nuclear trade to states which are outside the NPT and have nuclear weapons, including India, Pakistan, and Israel.

The United States wanted the India deal to forge a broad new strategic relationship with India. India had a more limited view and regarded the deal as an opportunity to enhance its nuclear program and status. Both claimed India is an emerging democratic world power unfairly constrained by global nonproliferation norms.

But in approving the deal, NSG states put their diplomatic and commercial interests with the United States and India ahead of their nonproliferation responsibilities. The NSG’s decision informed states in the developing world—many of which are now planning to embark upon nuclear energy programs—that the NPT is no longer the cornerstone of the global nuclear trade regime and that nuclear weapons are the currency of the realm.


Why did the United States and India need to negotiate the reprocessing of spent nuclear fuel and why did it take so long for both sides to agree?

The 2008 bilateral cooperation agreement anticipates that India will import safeguarded nuclear fuel for power reactors from the United States which will operate under IAEA safeguards and be dedicated to peaceful use. It also mandated the negotiation of a separate agreement spelling out the terms under which India may reprocess the spent fuel. During the negotiation of the 2008 agreement, Washington initially resisted giving India advance, long-term consent to reprocess spent fuel subject to the agreement, because a 1982 U.S. National Security Decision Memorandum limited such consent to the European Union and Japan.

The United States in 2008 agreed to give India consent to reprocess the spent fuel subject to the agreement and the two countries agreed reprocessing would take place in a new facility dedicated to reprocessing spent fuel under IAEA safeguards.

Negotiation of the reprocessing arrangements and procedures was delayed for three reasons: India’s desire to build more than one reprocessing plant, its physical protection concerns, and the basis for the U.S. right to suspend its consent to reprocessing.

India now aims to build two reprocessing plants at sites dedicated to construction of U.S.-supplied power reactors in India. According to India, this will eliminate transports of spent fuel and separated plutonium and therefore reduce the terrorist threat to its nuclear installations. The United States ultimately agreed to include both reprocessing facilities in the consent arrangements.


How has the agreement affected American businesses? Are there any steps left in order to implement the bilateral deal?

On the basis of the 2008 bilateral agreement, U.S. companies—most importantly Westinghouse and GE-Hitachi—plan to build nuclear power plants in India. A U.S.–India trade group claims that this business may ultimately be worth $130 billion by 2030.

With the reprocessing arrangements and procedures in place, the main hurdle standing in the way of full implementation of the cooperation agreement for American companies is that there is no nuclear liability protection under Indian law. India’s government prepared legislation for the Indian parliament last month which would protect foreign equipment suppliers from all civil liability claims in case of a nuclear accident.

However, the bill was withdrawn after it was attacked by parliamentary opponents because it compromised the right of Indian citizens to go to court for adequate compensation. This is a sensitive issue in India because of a major chemical accident in Bhopal in 1984. Victims experienced difficulties when trying to sue Union Carbide for damages.

Without civil liability legislation on the books in India, privately owned U.S. firms will not be willing to sell nuclear equipment to India, leaving the market to state-controlled French and Russian reactor vendors, whose accident liability is underwritten by their governments.


How will India handle the plutonium separated by reprocessing?

India has said it plans to use its separated plutonium to fuel a future fleet of breeder reactors. These would produce still more plutonium, some of which would be used later to fuel reactors with cores surrounded by blankets of thorium, to generate uranium-233, another reactor fuel.

From the outset of the U.S.–India negotiation, both sides understood that India would not agree to put its current and future breeder program under IAEA safeguards. Anil Kakodkar, head of India’s nuclear program during the negotiation, said that the breeder program would remain outside of safeguards “both from the point of view of maintaining long term energy security and for maintaining the minimum credible deterrent.”

The U.S.–India agreement is supported by a safeguards agreement between India and the IAEA. It provides for safeguards to be applied indefinitely to the nuclear fuel and facilities declared by India as eligible for safeguards under the U.S.–India agreement. Unless India recycles the safeguarded separated plutonium in safeguarded light water reactors, India would then establish two separate breeder reactor programs, one using the IAEA-safeguarded separated plutonium, and the other featuring unsafeguarded reactors and unsafeguarded fuel.

According to former IAEA Director General Mohammed ElBaradei, the India-IAEA safeguards agreement is of indefinite duration, meaning that safeguards will be applied in perpetuity to all plutonium subject to the reprocessing arrangements. But some Indians have suggested that India may terminate safeguards under “corrective measures” which India is permitted to take under the preamble of the agreement, should for any reason the U.S.–India deal be suspended by the United States, or should NSG revoke India’s nuclear trade privileges in the future. The IAEA does not support this view and the United States takes the position that Article 10 of the U.S.–India bilateral cooperation agreement provides for the perpetuity of safeguards.

Following India’s first nuclear test in 1974, the United States refused to give India consent to reprocess U.S.-origin spent fuel from two U.S.-supplied reactors at Tarapur. Under the new reprocessing arrangements, India could reprocess Tarapur spent fuel at either of the new safeguarded reprocessing facilities referenced in the arrangements.


What happens if India tests a nuclear weapon?

Conflict on this issue contributed to delays in the negotiations over the reprocessing agreement. India refused to agree explicitly to a U.S. right to suspend its consent to Indian reprocessing if India were to test a nuclear explosive. The Indians did not want a repeat of the Tarapur experience. The arrangements do not explicitly state that an Indian nuclear test would be grounds for suspending U.S. consent to reprocessing. But the United States could base suspension upon its determination that a test constituted a serious threat to U.S. national security. The United States also did not agree to Indian demands that the United States compensate India should the United States suspend or terminate consent to Indian reprocessing.


How has the deal influenced the nuclear climate in South Asia?

As a result of the U.S.–India deal—unless important countries such as China and the United States ratify the Comprehensive Nuclear Test Ban Treaty (CTBT), encouraging India to do the same—India’s future import of uranium fuel may permit it to resume nuclear testing with little worry that international sanctions will threaten its nuclear fuel supply.

Pakistan continues to urge the United States to match its nuclear cooperation pact with India and for nearly five years Washington has refused. This year, Pakistan resumed pressure in the context of an ongoing security dialogue and in March, Pakistan announced that it would block negotiations in the Conference of Disarmament on a Fissile Material Cut-Off Treaty on the grounds that the U.S.–India deal, flanked by arms transfers from Russia and Western powers to India, has tilted the nuclear balance of power in South Asia in India’s favor. Pakistan is now poised to embark on a significant nuclear military buildup.


How does the U.S.-India deal impact nuclear disarmament and nonproliferation efforts?

Irrespective of nuclear suppliers’ perceived strategic and commercial benefits associated with the U.S.–India deal, the NSG exemption amounted to readiness on the part of parties of the NPT to ignore a pledge they made when the treaty was indefinitely extended in 1995 not to engage in nuclear trade with states without comprehensive IAEA safeguards agreements.

Even before the sanctions on India were lifted, Iran (a party to the NPT) deplored the fact that the advanced nuclear states—including the United States, France, and Russia—were willing to do business with India and thereby would seriously undermine the NPT. Iran argued that while advanced states were awarding NPT trade privileges to a non-NPT party which had nuclear weapons, they were also inhibiting developing NPT states’ access to nuclear technology. As debate and negotiation of the U.S.–India deal wore on for three years, Iran’s argument gained traction among non-aligned and developing countries.

Much of the resentment expressed by Iran and other developing countries about the discrimination in India’s favor could have been blunted had the United States persuaded India to sign the CTBT and halt production of defense nuclear materials. Most NPT non–nuclear-weapon states now see few or no nonproliferation benefits from the U.S.–India deal.

In May, NPT parties will convene a Review Conference to examine the state of the treaty. The NSG exemption to India and the U.S.–India agreement may figure prominently among grievances raised by non-aligned and developing states, which constitute the majority of the NPT’s 190 members.