U.S.-India Nuclear Deal Drifts Dangerously

Hailed as the centerpiece of a new partnership between the world’s two most populous democracies, the U.S.-India nuclear deal has drifted dangerously since it was signed in 2008, analysts and former negotiators from both countries say.

The risk now is that other countries, particularly Russia and France, might benefit from all the hard work that the United States put into the deal.

The landmark agreement was supposed to allow the sale of nuclear reactors and fuel to India, even though the country has nuclear weapons but has not signed the Nuclear Non-Proliferation Treaty. Its advocates said it would bring tens of billions in business to the United States and create thousands of jobs, while also cementing a new partnership between the two nations to counter China’s rise.

The deal itself, symbolic of a new partnership between the two countries, is not in any political danger. But American companies have not yet sold any reactors or equipment to India. American nuclear fuel firms, which face no legal or policy hurdles, have also not begun selling to India. 

Personally propelled by President George W. Bush and Indian Prime Minister Manmohan Singh, the deal overcame enormous opposition from the non-proliferation lobby in the United States and from Indians who said the conditions attached to the deal undermined the country’s sovereignty. But once the ink was dry and the hard work of implementation began, the momentum stalled.

India’s enthusiasm for nuclear power has been dented by the Fukushima accident, and by problems in finding available land to build reactors. Meanwhile, onerous conditions imposed by India’s parliament on suppliers of nuclear equipment have tilted the playing field away from private-sector American companies in favor of state-owned companies from Russia and France, analysts say.

“You can see a possible outcome where the U.S. has expended most of the diplomatic capital, but companies in other countries are the main beneficiaries,” said Richard Fontaine of the Center for a New American Security in Washington.

As Secretary of State Hillary Clinton prepares to visit India this week, the deal’s supporters hope she can reignite India’s enthusiasm to clear the remaining hurdles.

“The Obama administration has done everything it can to implement the agreement,” said Ambassador Nicholas Burns, an undersecretary of state in the Bush administration who spent three years negotiating the agreement. “The problem from my perspective is on the Indian side. We haven’t seen the same degree of political commitment to follow it through.”

Singh put his government’s survival on the line to pass the deal. But in a country still scarred by the Bhopal gas disaster of 1984, he was powerless to prevent the passage last August of a law that would make suppliers of nuclear equipment liable for massive claims in the event of a nuclear accident during the reactor’s life.

That raises the risk of doing business in India to levels that American private-sector companies and their insurers cannot accept, but state-backed companies in Russia and France, with the much deeper pockets of their respective governments, might be able to live with. And it puts India far out of step with other countries, which put liability solely on plant operators.