Siddharth Varadarajan

Journalist | Writer | Analyst

End of the road for the 123 agreement

A senior scientist who has closely followed the nuclear deal told me recently of a peculiar ritual among the ancients known as the vridhrshti of the paramacharya. Here, the acolytes of a parmacharya who resists the inevitable call of nirvana dig a hole in the earth, place the reluctant saint in it and dispatch him from this world with the help of the largest coconut they can find. The parmacharya brought wisdom and clarity in his day but he has to eventually make way for others. In the same way, the 123 was needed to allow the NSG waiver to be born but it has outlived its purpose. The coup de grace could be Mr. Bush’s reservations on fuel supply, the riders the House and Senate attach, India’s refusal to sign a tainted agreement, or the eventual denial of permanent reprocessing consent. The only question is which coconut will prove to be the largest…

16 September 2008
The Hindu

End of the road for the 123 agreement

By undermining its own fuel supply assurances and reprocessing consent, the U.S. has made bilateral nuclear cooperation with India virtually impossible.

Siddharth Varadarajan

In a little less than two weeks, Prime Minister Manmohan Singh will travel to Washington in what is being billed as a reprise of his triumphal visit of July 2005. Three years ago, he left with an agreement that held the promise of nuclear commerce with the United States and with the rest of the world. Last week, at Vienna, the second of those promises was redeemed when the Nuclear Suppliers Group waived its export restrictions for India. As for the first, the Bush administration is pulling out all the stops to ensure the U.S.-India bilateral nuclear cooperation agreement, known as the ‘123 Agreement,’ is ready for signing on September 25.

For those in India who can see what is coming, however, the sheen of this promise has already begun to wear thin.

On September 10, President George W. Bush repudiated a key provision of the 123 Agreement when he declared the fuel supply assurances recorded in Article 5(6) of the agreement were not legally binding. This formulation has been repeated in two other documents submitted to Capitol Hill last week as part of the ‘123 Agreement package’: the ‘Report Pursuant to Section 104(c) of the Hyde Act’ and the ‘Nuclear Proliferation Assessment Statement’ (NPAS). The NPAS and Mr. Bush’s letter also introduce a dangerous new interpretation of the duration of reprocessing consent rights India has under the 123 Agreement, thereby reopening the possibility of spent fuel piling up again, as at Tarapur.

The NPAS and the Report are requirements of the Hyde Act. Taken together with Mr. Bush’s letter and the State Department’s answers to the House Foreign Relations Committee’s questions on the 123 Agreement, they offer a comprehensive picture of how the executive branch of the U.S. government intends to implement the agreement once it enters into force. Needless to say, the picture is not a pretty one. And though India is still officially committed to the 123’s passage, many in India now believe the Prime Minister should go to Washington to bury the 123 and not to praise it.

The U.S. argument that the fuel supply assurances are not legally binding since the 123 Agreement is a “framework agreement” is patently false. Though the agreement is a ‘framework’ whose implementation requires the drafting of commercial contracts with U.S. firms, this does not rob the commitments of their legal nature. Indeed, the 123’s chapeau notes that the provisions spring from the desire of the U.S. and India “to establish the necessary legal framework and basis for cooperation concerning peaceful uses of nuclear energy.” The use of the word ‘basis’ is important, which is why the U.S. resisted its inclusion during the negotiations with India last year.

This legal basis is required in order to provide sovereign legal protection in the event of such contracts being violated or abrogated for commercial or political reasons, and to balance the legal nature of India’s safeguards commitments. In any case, lifetime supply of fuel for Indian reactors is explicitly mentioned in Article 2(2)(e) on the ‘Scope of Cooperation,’ and in Article 5(4) on ‘Transfer of Nuclear Material.’ And Article 16(3) explicitly says Article 5(6)(c) where the fuel supply assurances are listed will continue to remain in force even after the Agreement is terminated, making it clear that these are legal and not political commitments. If doubts still persist about the legal basis of the fuel commitments, Article 14(8) is still more explicit: “It is not the purpose of the provisions of this Article regarding cessation of cooperation and right of return to derogate from the rights of the Parties under Article 5.6.” When the 123 Agreement explicitly says that the U.S. will not “derogate from the rights” of India “under Article 5.6,” this means the commitments in 5.6 are legally binding. Rights do not spring from “political commitments” and the word “derogate” was used precisely because of the legally binding nature of the fuel supply assurances. Not surprisingly, the U.S. side resisted the inclusion of this sentence, too, during the negotiations. If it conceded the point last July, it was only because it had every intention of repudiating it by the time the approval process was complete.

But the unilateral abrogation of fuel supply assurances is not the only problem with the U.S. interpretation of the 123.

The U.S. is not a fuel supplier and even without the latest American interpretation, India would probably need to tie up supplies from elsewhere to run any U.S. reactor it buys. A more fatal problem lies in the question of consent rights essential to reprocess the spent fuel. For here, no other country can cover for the U.S. With the experience of Tarapur behind it where U.S. consent to reprocess the spent fuel has not come in 45 years, India insisted the 123 Agreement provide this consent upfront. Accordingly, Article 6(3) grants India reprocessing consent. It also says that to bring this right into effect, India will establish a dedicated safeguarded national facility. Since the U.S. said more time was needed to negotiate the technical “arrangements and procedures” under which this facility would reprocess U.S.-origin spent fuel, a period of one year was provided for in the 123 Agreement for their finalisation.

These “arrangements and procedures” are limited to “provisions with respect to physical protection standards … storage standards … environmental protections … and such other provisions as may be agreed by the Parties.” There is no mention anywhere of withdrawal, termination or suspension of consent rights. Article 16(3), in fact, explicitly says Article 6 will continue in force even if the 123 Agreement is terminated, that is, India will never lose the right to reprocess. Although Article 14(9) allows for “suspension” of the “arrangements and procedures” in “exceptional circumstances, as defined by the Parties,” it can lead to the suspension of actual reprocessing activity only if India agrees to include such language in the yet-to-be negotiated “arrangements and procedures.” Unless this is done, the suspension of arrangements and procedures is meaningless because once India’s reprocessing rights are brought into effect, they can only be extinguished or compromised by India shutting down its dedicated facility or violating agreed arrangements and procedures.

Clever legal manoeuvre

The NPAS, President Bush’s letter and the State Department’s answers attempt a clever legal manoeuvre by suggesting that the “arrangements and procedures” are not just a trigger to bring the consent rights into effect but also a switch to affect the duration of this consent. All three documents are also silent about the one-year timeline in which the arrangements and procedures have to be finalised. Whether this silence is tactical, in view of Congressional opposition, or part of a policy rethink remains to be seen. But taken together, these documents clearly hold out the possibility of future termination of consent rights. Indeed, the NPAS explicitly notes that since “Article 14 is not among those continuing in effect if the Agreement as a whole were to be terminated,” the U.S. needs to “suspend the ‘arrangements and procedures’” for reprocessing “prior to termination of the Agreement itself.”

Though India has gently contested these claims, the U.S. Congress will likely give legislative expression to the executive’s interpretations as part of the 123 approval process. Thus, India must prepare itself for the very real possibility of being asked to sign an agreement that Congress would have robbed of its very essence. At that point, silence or gentle protestation will not suffice. Any riders attached to the 123 Agreement would have the status of reservations in international law. Silence by India would be taken as concurrence with these reservations. Ideally, the Prime Minister should refuse to sign it since the implementation protocols on the U.S. side run counter to what was agreed to between the two countries. If he feels he must sign, a separate national statement would have to be issued contesting the U.S. reservation.

Of course, an agreement with orthogonal reservations by the two parties would be meaningless in political or commercial terms. Even if Congress passes the 123 Agreement without attaching riders and conditions, the prospect for bilateral cooperation is dim. This is because the U.S. (or Congress, whose approval under Section 131 of the Atomic Energy Act the administration is committed to seeking) will insist on including suspension of reprocessing consent in the “arrangements and procedures”.

The 123 was needed to allow the NSG waiver to be born. Today, it has outlived its purpose. For India, S.K. Jain of the Nuclear Power Corporation (NPCIL) has already pointed out the bottom line: the purchase of reactors must be linked to lifetime supply of fuel and reprocessing rights. If U.S. reactors are ever to make it to Indian shores, the U.S. must change its policy or force India to abandon this mantra. Time will tell whose resolve is going to be stronger.

5 comments on “End of the road for the 123 agreement

  1. Anonymous
    September 18, 2008

    It will be a challenge to do business with US companies . Their nuclear sector is not clearly separated into civilian and military. Many of their contractors have close relationship with the govt. labs working on nuclear technology. So how can India deal with companies which develop both civilian and military(sensitive) technology. It will have to go through complex hurdles to make sure that their business complies with Hyde Act/123or whatever govt rules. Now when India’s main nuclear agency and allied facilites apear on the < HREF="" REL="nofollow">entity list<>…who exactly from the Indian nuclear industry will import nuclear fuel and manage. Maybe it is good that a separate civilian nuclear sector will have to stand up on its feet divorced from the DAE. But it will be a challenge.

  2. Anonymous
    September 16, 2008

    @ Siddharth,Is the additional protocols drafting and signing a mere formality now after the waiver? The additional protocols relevant to India have already been mentioned by you, and incidently, President Bush also mentioned them.All-I believe as M.K. Venu said, India should develop strong ties with GE and other American firms through Indian entities based on long and medium term mutual advantage.India should have strong ties with US which should people of these two countries working together on large projects.Cheers

  3. captainjohann
    September 16, 2008

    Sir,I donot think Indian Politicians have the guts to break the COCONUT.The deal will be signed on 25th by Manmohan with CBDT in backdoor.

  4. Siddharth Varadarajan
    September 16, 2008

    Interesting article by M.K. Venu in today's Economic Times, making the case that for the 123 to work, US firms will have to lobby the US Government:

  5. Anonymous
    September 16, 2008

    Siddhart,Not sure where to post this feedback, but it is difficult to navigate thorugh this blog because the page is very long and the system become very slow. Regds

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This entry was posted on September 16, 2008 by in Nuclear Issues.



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