Siddharth Varadarajan

Journalist | Writer | Analyst

U.S. delivers 123 blow to India

In his September 10 message to Congress, President Bush makes it clear that the U.S. does not consider itself legally bound to honour its fuel supply assurances to India even after the 123 agreement is approved…

Story impact: NDTV, PTI,
Communist Party of India (Marxist), CNN-IBN, The Times of India

12 September 2008
The Hindu

[In the print edition of The Hindu, this story was carried in two parts. I have recombined them here but the original version of the second part, ‘India believes fuel assurances are binding’ can be found here.]

U.S. delivers 123 blow to India Fuel assurances not binding, says Bush

Siddharth Varadarajan

New Delhi: The United States has diluted the fuel supply assurances contained in the ‘123 agreement’ on nuclear cooperation with India, with President George W. Bush formally declaring, in his September 10 message to Congress, that all American commitments to the Indian side in this regard were not “legally binding.”

As part of the process of completing the U.S.-India civil nuclear cooperation initiative, Mr. Bush forwarded the text of the 123 agreement to Congress with a covering note and a separate memorandum containing seven ‘determinations’ that India had conformed to the non-proliferation commitments it had made in July 2005.

But the covering note had a sting in the tail on the question of fuel assurances, which India sees as an essential component of the interlocking set of commitments and obligations both sides have undertaken since 2005.

“In Article 5(6) the Agreement records certain political commitments concerning reliable supply of nuclear fuel given to India,” President Bush’s statement says. “[The] Agreement does not, however, transform these political commitments into legally binding commitments because the Agreement, like other U.S. agreements of its type, is intended as a framework agreement.”

This formulation, say Indian officials, is completely at odds with the understanding India has that the assurances are indeed meant to be legally binding. “After all, India has committed itself to binding commitments like safeguards,” said an official. Officials also reject the notion that the Indian 123 could be treated “like other U.S. agreements of its type” since fuel supply assurances figure only in the Indian agreement. And the need for legally binding fuel assurances arose because India — which is not obliged to place all its reactors under safeguards, unlike other non-nuclear weapon states with which the U.S. has signed agreements — was voluntarily accepting IAEA supervision.

Since the signing of the 123 agreement is meant to be the highlight of Prime Minister Manmohan Singh’s forthcoming visit to the U.S., Indian officials are now scrambling to find ways of undoing the damage caused by the Bush message.

The administration’s formulations, say sources, ensure that even if the 123 agreement is rapidly approved, its provisions will remain a virtual dead letter given their negative implication for the commercial viability of any reactor imports from the United States, as opposed to from Russia or France.

123 and Hyde Act

Finalised in July 2007 after several months of difficult negotiations, the 123 agreement on civil nuclear cooperation with the United States was meant to pave the way for the actual import of nuclear material by India as broadly allowed by the Hyde Act of December 2006 but without any of its encumbrances.

If the Hyde Act embodied restrictions that India found offensive, Indian negotiators sought to create a legal framework for nuclear trade with the U.S. that would ensure two critical objectives: lifetime supply of fuel for any reactors India might import or place under safeguards, and the right to reprocess the spent fuel produced by U.S.-origin facilities.

Early in the negotiations, the Indian side pressed for the legal recognition of India’s rights rather than the mere assertion of a political commitment. And they were satisfied when the U.S. finally agreed to the incorporation of the fuel supply assurances contained in the March 2006 U.S.-India statement. And to upfront reprocessing consent rights with the proviso that these rights would take effect upon the establishment of a new, safeguarded reprocessing facility in India and the conclusion of an agreement on arrangements and procedures within a year of India making a formal request.

So confident was the United Progressive Alliance government of the ‘legal’ sanctity of these fuel assurances that, in its note of September 17, 2007, it told its erstwhile Left partners that “once the 123 agreement is approved by the U.S. Congress, it will become U.S. law, which as the U.S. Constitution expressly provides, ‘shall be the supreme Law of the Land.’ The U.S. commitment for assured fuel supplies for the lifetime of India’s safeguarded reactors should, therefore, be under no doubt.”

The government also argued that Article 5.6(a) of the 123 agreement was tantamount to “a U.S. commitment to amend its domestic laws should any law stand in the way of the U.S. fulfilling these fuel supply obligations.”

In its note of September 24, 2007 to the Left parties, the government amplified on this theme: “By its very nature as an enabling legislation, the Hyde Act is not required to include fuel supply assurances… The 123 agreement, which was negotiated thereafter, included them in toto. This validates our contention that it is the 123 agreement and not the Hyde Act that should be treated as governing the rights and obligations of the parties.”

The first clear sign of the U.S. refusing to treat the fuel assurances as legally binding came in the answers provided by the State Department to queries of the House Foreign Relations Committee (HFRC) about the 123 agreement. These answers were provided to Congress on January 16 but made public only last week.

In question 14, the HFRC asks: “Which of the commitments that the United States made in Article 5 are of a binding legal character? Does the Indian government agree?” The State Department’s reply was: “The question quotes paragraph 6 of Article 5, which contains certain fuel supply assurances that were repeated verbatim from the March 2006 separation plan. These are important Presidential commitments that the U.S. intends to uphold, consistent with U.S. law.”

Though Indian officials saw this answer as an attempt by the U.S. to duck what they saw as legal commitments, they assumed the administration would treat these commitments as legally binding once they had become part of the U.S. law following the passage of the 123 agreement in Congress.

But President Bush’s message clearly states that the U.S. does not believe the fuel supply assurances would become legally binding even after the 123 is approved.

Other answers in the State Department document sought to limit the kind of disruptions which would be covered by the fuel supply assurances to those which occurred due to circumstances beyond India’s control. This ruled out a nuclear detonation, it said, something India contests. But with the latest U.S. interpretation, it is clear that even in the event of disruptions caused by “market disruptions in the global supply of fuel; and the potential failure of an American company to fulfill any fuel supply contracts it may have signed with India” — two scenarios mentioned in the answer to question 15 — India cannot count on legally binding fuel supply assurances.

When the State Department’s answers were made public last week, senior officials warned the government of the urgent need to contest its most damaging interpretations. However, India kept its own counsel because it did not wish to do anything to compromise the campaign for the NSG waiver, which the U.S. was leading. But with the White House now literally rushing to secure legislative approval for the agreement before September 26, the Indian side is discovering that the time for it to press its case might already have run out.

8 comments on “U.S. delivers 123 blow to India

  1. Siddharth Varadarajan
    September 16, 2008

    @ DarylPlease read my piece today on what is legally binding and what is not.But all’s well that ends well. Even if the 123 is not finalised, the NSG waiver is through and that’s what matters.I suspect, however, that the U.S. corporate sector will, in a few years, likely find a solution to the claim that fuel assurances cannot be a legally binding part of a reactor supply agreement. GOI misled the Indian public in saying Hyde had become irrelevant after the 123. With the NSG in hand now, of course, they have been proved right, though not in the way they originally meant.

  2. Daryl G. Kimball
    September 16, 2008

    Siddarth:As some of the comments suggest, ou and the GoI have it wrong on two counts: 1) the USG is not “lying” or “reneging” on its promises if its interpretation is that the fuel supply assurances are only politically binding. Its a difference of opinion that the GoI was in the very least aware of back in Aug. 2007 and at worst has been misleading the Indian public about with the help of the not so objective Indian press. 2) The Hyde Act will remain in effect even if the 123 is approved. It doesn’t apply to India, but it applies to U.S. nuclear trade with India. The 123 is also not a “treaty” as suggested by the GoI.

  3. Anonymous
    September 13, 2008

    >>> . . . I think it would be tactically wise for the Indian govt to keep quiet (and journalists like you not to overplay this) and let the deal pass in the US Congress . . . <<<Now a veiled gag order on journalists!! What all low depths these pro-wheeler-dealers not resort to??

  4. Anonymous
    September 13, 2008

    The purchaser will not know what is sensitive and what is not sensitive because what is sensitive is classified. So the US govt. in cohort with suppliers will use this, the non-legal binding nature of the agreement and intellectual property rights/trade secret to restrict/filter high-end technology transfer even if we don’t do any nuclear tests. This will eventually constrain Indian civilian nuclear industry. Can anybody remind me what exactly do we intend to buy from US ?

  5. srikanth
    September 13, 2008

    @ SatheesanI agree with what you have said. ” President Bush can refuse to follow the expressed will of Congress in matters of foreign policy “

  6. Anonymous
    September 12, 2008

    I dont know what this ‘legally binding’ commitment means – under whose law? Is there an arbitration clause like in Enron-Govt of India deals?Everyone knows laws can be changed by Congress in the case of US and Parliament in the case of India, even with retrospective effect. GOI has done that many many times, often to defeat judgments passed by its own Supreme Court. Are we expecting India or the US to give that up?If India says it will not abide by its commitments for whatever reason, what ‘legal’ remedy lies and to who? Are we going to be sued in Hague or the reaction to that stand will be primarily poltical/economical/military?If France or Russia agree to supply now and renege later because govt. changes, what can we do?

  7. Satheesan
    September 12, 2008

    Hi Siddharth,A little lying/obfuscation is happening on the part of both governments to get the deal passed. I think this is part of a Bush administration ploy to get the 123 through Congress post-haste.Even if we assume otherwise, and go by US State Department’s logic (obviously the wording is all theirs) that this is a framework agreement and many provisions are not legal commitments, I think it would be tactically wise for the Indian govt to keep quiet (and journalists like you not to overplay this) and let the deal pass in the US Congress before we play our hand. By that I mean build the legal assurances on a project-specific basis and force GE and Westinghouse work backwards on their governments to ensure their projects go through. Surely, our government would have thought of this before!!! As it is, the NSG waiver has given us far greater room for manoeuvre and as long as we can ensure that critical countries such as Russia and France are kept happy, I can’t see the Americans getting out of this commitment in a hurry despite this pre-Congress-clearance posturing.

  8. Adithya Das
    September 12, 2008

    Hi Siddharth,How can the US start lying like this?And I cant blv that the UPA govt has gone numb over these blatant lies that these ppl r spking..Article 14.8 of the 123 clearly states that the “Consultations within the parties shall address mutual commitments as contained in Article 5.6” before the termination. If this is not “Legally Binding” then i blv we shud have the spunk to tell US that we are not legally obligated to put your material under safeguards as well since Fuel Supply assurances are essential in India putting facilities under safeguards. I have never seen such dishonest ppl ever. What is the way out for UPA govt cos I blv they r in deep soup now after this revelation.

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This entry was posted on September 12, 2008 by in Nuclear Issues.



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