The possibility that China will export two nuclear power reactors to Pakistan looms over the annual meeting of the Nuclear Suppliers Group—a 46-nation body that sets global rules for nuclear trade—scheduled to begin next week in New Zealand.

In a Q&A, Mark Hibbs analyzes the importance of the meeting and significance of the China–Pakistan deal. Hibbs says that “in the aftermath of the 2008 U.S.–India deal and the NSG’s decision to allow it, the NSG will have to perform a delicate balancing act to find the least unsatisfactory solution to meet China’s challenge.”

What is the Nuclear Suppliers Group? What is the significance of the meeting in New Zealand next week?

The Nuclear Suppliers Group (NSG) includes 46 member states and represents virtually all the world’s nuclear equipment, fuel, and technology-exporting countries. The group was created by seven states in 1975 to standardize nuclear trade rules after India tested a nuclear explosive (the device used plutonium generated in a reactor supplied by Canada).

The NSG has no secretariat and participation by its members is voluntary. The centerpiece of the NSG is two sets of non-binding export guidelines. The first set of guidelines concerns materials and equipment specifically designed or prepared for nuclear use, and the second set is for so-called dual-use items that have nuclear applications.

Each year, the NSG holds a plenary meeting where decisions are taken, by consensus, following recommendations from the consultative group—the NSG’s standing working body. During the annual five-day meetings, the NSG’s members discuss current nuclear trade policy issues, review implementation of the guidelines, and talk about future actions.

This year, the NSG is in the international spotlight because the global nuclear trade regime is at a crossroads. Under pressure from France, India, Russia, and the United States in 2008, the group exempted India from a long standing NSG requirement that non–nuclear-weapon states benefiting from nuclear trade put all their nuclear activities under safeguards of the International Atomic Energy Agency, ensuring that they are for peaceful uses. Since 1995 the parties of the Nuclear Non-Proliferation Treaty (NPT) have embraced this requirement, and it was endorsed again last month at the conclusion of the NPT Review Conference in New York.

Now, however, China appears ready to export two reactors to India’s nuclear-armed rival Pakistan, setting up a potential conflict at the meeting in New Zealand should China officially confirm the deal.


What’s on the meeting’s agenda for next week?

The meeting will be divided into two parts—a consultative group and a plenary session. The consultative group will meet during the first three days and the NSG will hold a plenary meeting for the last two days.

This year, the NSG members have put two important matters on the agenda and both will be dealt with in the consultative group and plenary meetings. One concerns the transfers of items for reprocessing fuel and enriching uranium. The other is an ongoing “comprehensive review” of all the NSG’s technical guidelines. This review was mandated by last year’s plenary meeting held in Budapest.

In addition, the event in New Zealand will include national presentations on the exchange of information among member states and on implementation and enforcement of the NSG guidelines. The main focus of many presentations will be on efforts to restrict exports to Iran, which continues to try to import nuclear wares in defiance of United Nations Security Council resolutions.


Are the NSG’s guidelines sufficient to deter nuclear proliferation?

Many guidelines are decades old and some are now out of date. The NSG learned a great deal from Abdul Qadeer Khan’s clandestine nuclear proliferation network on how cheaters evade controls and some changes in the guidelines will be made in response.

Other changes are necessary because technology has advanced. Would-be proliferators can now procure equipment that can help make nuclear weapons or produce fissile material but do not fall under current guidelines.

Proliferators are taking advantage of the outdated guidelines and new technologies. For example, Iran recently imported pressure gauges for its uranium enrichment program that did not fall under the existing guidelines. The rule for this equipment is about 20 years old and it stipulates that items should be subject to export controls if they feature corrosion-resistant sensors made of aluminum or nickel metal or alloys. Vendors are now making nuclear-grade gauges that have sensors made of different materials and not all of the materials are reflected in the current NSG control list.

Since 2004, the NSG has provided a stopgap measure. There is a “catch-all” clause in its guidelines to prevent exports of items that do not conform to the guidelines. However, effective implementation of the catch-all clause often requires the coordination and cooperation of several national governments and government agencies. In some cases, errors or lack of pursuit by a single agency has spoiled international efforts to block transactions.

So the purpose of the NSG’s comprehensive review is to update all of the technical guidelines. The work has been underway for about a year, and it may take at least another year to finish. When the review is complete, some items currently subject to controls may be dropped, others may be added, and some guidelines may be modified. Focus areas of the review include vacuum equipment, valves used in enrichment plants, and equipment that measures uranium hexafluoride gas flow in enrichment plants.


The NSG continues to negotiate new guidelines for reprocessing and uranium enrichment. Why are the negotiations taking so long?

The NSG’s current guidelines recommend that technology holders exercise restraint in transferring reprocessing and enrichment items.

Uranium enrichment know-how had been spread around the world by the A. Q. Khan network and in response, President Bush proposed in 2004 that further exports of technology for uranium enrichment and reprocessing be banned. Because this was unacceptable to many countries, NSG states sought a criteria-based approach to guidelines for these items. In 2008 Bush agreed, provided that the proposed criteria were sufficiently strict.

Since then, NSG members have been negotiating the terms of the criteria. Agreement has been elusive because numerous states—including Argentina, Brazil, Canada, South Africa, Spain, Switzerland, and Turkey—have complained that they would suffer discrimination should the guidelines be amended as proposed by the United States. Technology-holding countries could block their access to know-how on subjective political grounds. Their concerns are legitimate because some of these countries want to preserve their right under the NPT to produce fuel for future fleets of power reactors.

Last year, Canada led the NSG in breaking the deadlock on this issue, and some other NSG states have followed Ottawa’s example. Also in 2009, the G8 countries—all of which are NSG members—announced they would begin implementing the new draft guidelines for enrichment and reprocessing transfers independent of their approval by the full NSG. But not all 46 states have agreed to the package yet.


Will NSG members resolve their differences on reprocessing and enrichment transfers next week?

The chances are 50-50 and hinge on the positions taken by Turkey and South Africa. Objections raised by others have been resolved or have receded.

The fact that the NPT Review Conference ended in consensus last month might prompt all NSG members to agree to the new proposed guidelines, especially since states making objections have not proposed alternative language. But the matter is sensitive because the objections made by Turkey and South Africa are based on principles and could become politicized. There is some apprehension that in the wake of the fuel supply deal struck by Brazil and Turkey with Iran last month, and perhaps the Israeli raid on a Gaza-bound ship in the Mediterranean, more political objections to the new criteria might be voiced.

This year, Turkey—like Canada, Spain, and Switzerland previously—has raised fundamental objections to a proposed rule for future uranium enrichment projects that requires technology holders not to share their know-how with new partners. South Africa has objected to the proposed requirement that recipients of enrichment and reprocessing items have an additional protocol in place with the IAEA, giving the IAEA additional access to the state’s nuclear activities.

If Turkey and South Africa do not drop their objections at the meeting, the members may bracket out the contentious items for now and agree by consensus to the rest.


Will last month’s Non-Proliferation Treaty Review Conference have any impact on the NSG?

Yes. During the NPT Review Conference in May numerous states warned that the NSG exemption for India created a precedent whereby states with nuclear weapons that are not party to the treaty—Israel, Pakistan, and India—would get a better deal than non–nuclear-weapon states that are party to the treaty. The fear is that this could prompt non–nuclear- weapon states to leave the NPT in the future. Iranian President Mahmoud Ahmadinejad dramatically made that point when he spoke at the opening of the Review Conference.

The final consensus document of the Review Conference reflected this concern and stated that new supply agreements for transferring materials and equipment for nuclear activities should include essential preconditions. Countries should agree to comprehensive IAEA safeguards and legally binding commitments to not acquire nuclear weapons or explosive devices.

NPT state parties had established that condition in 1995 when they agreed to indefinitely extend the treaty. In reaffirming this condition last month by consensus, NPT parties underscored that the U.S.–India deal and the NSG’s lifting of nuclear trade sanctions against India in 2008 constituted an exception and that neither Pakistan nor Israel should be granted NPT nuclear trade privileges. Were the NSG to provide such an exemption to Pakistan or Israel, this would contravene NPT resolutions supported by 189 countries.


China wants to export reactors to Pakistan. Is this a violation of NSG guidelines? Will this issue be on the agenda for the NSG meeting?

This is not on the agenda. But China, which joined the NSG in 2004, is now expected to make a statement about the matter in New Zealand. China might disclose its intentions during the plenary meeting on the last two days, when NSG members plan to discuss their activities with non-NPT countries.

If China aims to export the reactors, Beijing has three options: to follow the example of the U.S.–India deal and formally request an exemption from the NSG guidelines for its trade with Pakistan; to claim that the export of the reactors is “grandfathered” by a pre-2004 Sino-Pakistan nuclear cooperation agreement; or to exercise its sovereign right and ignore the guidelines, which are voluntary and non-binding. According to diplomats, as of mid-June, Beijing had not yet decided which of the three options it would choose.

China might argue that the exports could be justified by the need for regional balance in South Asia in the aftermath of the NSG’s lifting of sanctions against India. But some in Beijing may instead assert that the commerce was grandfathered by the bilateral pact with Pakistan, thereby obviating any political justification by China for making an exception to the NSG rules.

However, when China joined the NSG it told the group that the Sino-Pakistan nuclear cooperation agreement permitted China to export the Chashma-2 reactor to Pakistan, small research reactors, and the fuel for these units. On the basis of previous Chinese statements, the United States will come to the meeting in New Zealand understanding that the supply of additional power reactors would not be grandfathered.

The United States is not in favor of such a deal, but because Washington pressed the NSG—and China—to exempt India from NSG trade sanctions in 2008, it is now more difficult to complain about China’s desire to export reactors to Pakistan.


Will we see resolution on the China-Pakistan deal in New Zealand?

If China spells out that it intends to export the reactors, it will then be up to the NSG’s members to decide whether they will accept this, and if so, on what terms. A quick decision appears unlikely as NSG members on the eve of the meeting did not agree on how the body should respond.

This week, a spokesman for the U.S. State Department told reporters that China should request a formal exemption from the guidelines to export the reactors. Some other NSG states, however, disagree and fear that this route could lead to a protracted debate over whether the NSG should dilute the guidelines to accommodate China. A request for an exemption by China could also expose individual NSG states to pressure from China to get the exemption and if China failed, it could threaten to leave the NSG.

In the aftermath of the U.S.–India deal and the group’s decision to accommodate it, the NSG will have to perform a delicate balancing act to find the least unsatisfactory solution to China’s challenge. In the view of some NSG states, an agreement permitting China to grandfather the exports under the 2004 nuclear cooperation agreement with Pakistan would be the least damaging outcome, but it may not be credible. If China seeks an exemption, NSG countries could urge Beijing to provide nuclear security and non-proliferation benefits in exchange for limited commerce with Pakistan.

But NSG members must weigh the risks carefully. Pushing Beijing out of the NSG would be dangerous given China’s fast-growing share of global nuclear trade. Beijing may ignore objections of other NSG states and it might even react to a rebuke by threatening to leave the NSG. NSG states, however, have leverage over China in nuclear matters as Beijing knows that it needs to import uranium from Australia, Canada, and Kazakhstan to keep expanding its nuclear power program. It also needs support from vendors in France, Japan, Russia, South Korea, and the United States to keep building and exporting reactors.