Thursday, October 28, 2010

India signs nuclear liability convention

One of the world’s oldest civilizations grapples with 21st century technology dilemmas

IAEA India signs CSCIn an effort to smooth the rough edges of a domestic law on liability of suppliers of components for nuclear reactors, India has signed an international agreement at the IAEA which set standards for compensation in the event of a nuclear accident. The Hindu reports that the agreement was signed in Vienna on the personal instructions of Indian Prime Minister Manmohan Singh.

[Photo: Indian Ambassador Mr. Dinkar Khullar signed the Convention on Supplementary Compensation for Nuclear Damage on behalf of his country at IAEA headquarters in Vienna. (Photo Credit: D. Calma/IAEA)]

In Washington, DC, U.S. Under Secretary of State William Burns said that India's signing of the CSC "was a very positive step" that will insure international standards will apply to U.S. nuclear firms doing business with India.

Like all diplomatic instruments designed to create better relationships in the area of technological trade, the Convention on Supplementary Compensations (CSC) is a work in progress. It has no legal power inside India’s borders. It has been ratified by only a few countries including the U.S.

The net effect is India is sending a signal to U.S. firms it wants them to do business there. The explosive political reality is PM Singh has no maneuvering room to change the draconian law now on the books that assigns liability to suppliers of nuclear reactor components for up to 80 years.

What’s in the international convention

In a fact sheet published by Indian wire services, the international conventions laid out by the CSC include:

  • Setting limits in liability for a nuclear plant operator
  • Setting time limits for victims to seek compensation
  • Require nuclear operators to have liability insurance or other financial security measures
  • Establish a single court for hearing claims

India US nuclear dealThe U.S. has objected to India’s liability law because it puts the emphasis on suppliers and not operators.

In the case of U.S. publicly traded firms, their stockholders would be at risk for decades after components were installed and in use at Indian reactors.

Efforts to defuse the issue have not succeeded because they have the public appearance of watering down the law. Initially, U.S. firms wanted India to delete two sections of the legislation. The Singh government rejected these demands as politically untenable.

No private investment in nuclear power stations is allowed under Indian law. All reactors supplied by American firms will be owned and operated by the Indian government or state owned corporations.

Another idea was that the Nuclear Power Corporation of India Ltd (NPCIL) would be the de facto supplier to domestic nuclear reactor projects even if components came from American firms. This would shift the burden of liability from American firms to NPCIL. Opposition groups in the Indian parliament vetoed this idea. The reason is they’ve handed Singh’s government an international embarrassment and do not want to let him escape it.

What happened to the 2008 deal?

What rankles U.S. diplomats is that in 2008 the then Bush Administration expended considerable efforts to help India convince the Nuclear Suppliers Group to end its 30-year ban on selling that country uranium for its civilian nuclear reactors. The reason for the ban is that India has not signed the Nuclear Nonproliferation Treaty.

In return, India promised U.S. firms access to its $150 billion nuclear market which will build 20-35 GWe of new reactor power stations in the next few decades. The passage of the domestic liability law, with a provision that allows operators to seek recourse to suppliers in the event of an accident, has put egg on the face of the Singh government. U.S. firms have balked at signing deals to build reactors for India with this provision in place.

To complicate matters, the quid-pro-quo was seen as a signal of an enhanced relationship between the two countries. India has in the past taken a “nonaligned” stance between East & West leveraging this status for advantage relative to both the U.S. and Russia. The nuclear deal was a symbol of change to a tilt to the West.

India needs a better relationship with the U.S.

Singh ObamaNow India wants U.S. defense technologies to replace aging Russian equipment. The U.S. isn’t ready to sell given the rigid stance of the Indian government on the liability clause.

President Obama (right) will visit India Nov 6-9 ahead of his participation in the G-20 summit in South Korea the following week. He’s expecting to announce, with Singh (left), at least two nuclear reactor deals for Westinghouse and GE-Hitachi.

The Wall Street Journal reported that a senior U.S. government official told the newspaper India still has to bring its nuclear liability regime in line with international norms to ensure U.S. firms will do business there.

There is a lot more at stake. The WSJ puts it succinctly:

“The nuclear deal wasn't just a commercial partnership but also a symbol of the close strategic ties India and the U.S. are forging after decades of Cold War-era estrangement. U.S. officials don't want the spat over nuclear liability to overshadow other areas of cooperation Mr. Obama will highlight, including combined efforts in counterterrorism, energy research and education, and growing bilateral trade that is expected to reach $50 billion next year.”

The latest possible method for resolving the liability dispute is to set up a bilateral relationship for liability matters since the CSC still has to be ratified by India’s parliament. Given its hostility to any change to the liability law, the likelihood of success for ratification of that measure is not good. A bilateral diplomatic agreement would essentially pledge the U.S. government to stand behind American nuclear firms that do business with India.

India wants U.S. defense technologies to bolster its stance against Pakistan, which it blames for a deadly terrorist attack in Mumbai. To get them it must find a way to let U.S. nuclear vendors in without setting off political turmoil.

PM Sigh and his minions will be burning the midnight oil in New Delhi as will Sec. of State Clinton to resolve the uncertainties. Obama does not want to show up in India to be insulted as he was by the International Olympic Committee last year. It will be down to the wire in New Delhi.

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1 comment:

Joffan said...

Dan, it's "quid pro quo".

Thanks for the article, although it seems still unclear whether or not the ludicrous supplier liability will continue.

Clearly faulty components need to be controlled - but equally the
operator needs to take on responsibility at some point. If I sell you a hammer, I'm not going to be responsible for everything you do with it, or for your broken greenhouse when the head flies off ten years later.