A civil nuclear agreement is one of the key outcomes New Delhi is pushing for in Prime Minister Narendra Modi's visit to Japan that starts tomorrow. Recently, in Naypidaw, Myanmar, foreign minister Sushma Swaraj called on her Japanese counterpart Fumio Kishida to "bring talks on civil nuclear agreement to their logical conclusion".Given its nuclear history, it is a wonder that Japan is even willing to consider a deal with a country that refuses to sign either the Nuclear Non-Proliferation Treaty (NPT) or the Comprehensive Test Ban Treaty (CTBT). That they are, is a function of geopolitics, business sense and the 2008 Indo-US nuclear deal.
Japan has struck nuclear deals with Vietnam, Jordan and Turkey. But India is the only country that Japan is dealing with which possesses nuclear weapons and has not signed the NPT. The deal could compromise Japan's national identity as a leader of non-proliferation and disarmament, ironically, a self-image that India still has of itself. Tokyo wants a separate safeguards agreement underscoring India's commitment to a nuclear test moratorium and non-proliferation. New Delhi says the assurances provided for in the Indo-US nuclear agreement are sufficient.
India has an obvious interest in meeting its burgeoning energy demand through nuclear energy. India plans to construct 18 more nuclear power stations by 2020. This provides an enormous business opportunity for Japanese companies.
Japan does not have a reactor design of its own. But the US-based Westinghouse Electric Co is controlled by Toshiba of Japan and it currently builds and operates half of the world's nuclear plants. Four of its AP1000 reactors are being built in China. The GE-Hitachi Nuclear Energy is a nuclear alliance of two global giants also headquartered in the US. As of now, it doesn't have a working reactor, but it has several advanced designs that have been certified, or are in the process of certification.
Of course, there is also interest among Japanese equipment-makers that fabricate equipment like large-size 1,000 KW turbines, instrumentation and control systems that go into power plants. Several of the reactors being offered by the US and France have Japanese components. But there are other issues Japan needs to consider.
First, it will enhance the geopolitical closeness of India and Japan in confronting an assertive China. This underlies the strategic partnership that Tokyo and New Delhi are seeking to construct with the blessings of the US. Second, an Indian deal could also kick-start the dormant Japanese nuclear business that has virtually shut down after the Fukushima disaster. Third, with China also moving into the reactor export market with its own 1,000 MW reactor, opportunities for Japanese companies are declining.
When it comes to the nuclear business, India is not lacking for options. South Korea, the US, France and Russia are all keen to work with India. India recently became the first non-NPT country to which Australia will export uranium. China — yes, China — is another country interested in nuclear-dealing with India.
In 1993, China supplied India low-enriched uranium to fuel the Tarapur reactor after the US and France stopped their supply. Beijing was reluctant to support the Indo-US nuclear deal for geopolitical reasons. But it finally allowed the waiver for India to pass in the Nuclear Suppliers Group (NSG).
Last May, the joint statement issued following Chinese premier Li Keqiang's visit to New Delhi declared that the two sides would "carry out bilateral cooperation in civil nuclear energy" within the bounds of their international commitments. Sino-Indian nuclear cooperation is not quite around the corner. Apart from the industry being relatively young there, China remains wholly committed to Pakistan and any dealings with India could cause turbulence in Sino-Pakistani ties.
The 1,400 MW reactor base plant that South Korea is building in the UAE is one of the most advanced in the world. In 2011, India signed a nuclear agreement with South Korea. The South Koreans are interested in setting up a power plant in India based on their 1,000 MW reactor design. This option will probably be more competitive than the US and French offers, but India may be under geopolitical obligations to push the latter projects first.
The ball is now in India's court. It needs to do something about the draconian nuclear liability law that has effectively scuttled the enormous opportunities that opened up with the NSG waiver. The Modi government has promised to facilitate the process of starting businesses in India. It could show how serious it is by starting with the nuclear power business.
The Economic Times August 29, 2014