Sixteen years ago, this writer and other organisers of the Coalition for Partnership with India rejoiced at the final approval of the United States-India civil nuclear deal through the U.S. Congress. The long struggle for passage of the necessary U.S. legislation began in 2005, and it was only in late 2008 that the Coalition succeeded in working with the George W. Bush administration and U.S. Congressional leaders to make the deal legal under U.S. law.
The Coalition for Partnership with India was a loose association of businesses, Indian-Americans, and academics that supported U.S. approval of the deal in the face of fierce opposition that stipulated that the deal would promote the proliferation of nuclear weapons. As a consultant to the U.S.-India Business Council, this writer was privileged to recruit and act as a liaison among Coalition components, plan strategy, and advocate before the Congress.
A game-changing deal
The U.S.-India civil nuclear deal was a watershed moment and opened a whole new era in defence and strategic cooperation for the two democracies that had become estranged during the Cold War. Without the trust engendered by the willingness to cooperate in dealing with the most powerful and potentially most destructive technology ever seen, the present level of U.S.-India interaction on defence purchases and manufacturing, military exercises, technology transfer, intelligence sharing, and crisis management would never have occurred.
And yet, the energy and commercial promises of the U.S.-India deal have never been fulfilled. Those of us who supported and advocated for the deal envisaged the augmentation of the Indian civil nuclear sector with many plants being built using U.S. equipment, technology, and allied services. Employment would be created both in the U.S. and India. More electricity would be generated by plants to fuel Indian industry and benefit the average Indian. This energy would not generate greenhouse gases and help wean India away from an over-reliance on climate changing, and often toxic, fossil fuels. Even though U.S. President Barack Obama announced in 2016 that Westinghouse would build six new nuclear plants in India, this has not happened yet.
Jake Sullivan, in his last trip to India as U.S. President Joe Biden’s National Security Adviser, announced, “… the United States is now finalizing the necessary steps to remove long-standing regulations that have prevented civil nuclear cooperation between India’s leading nuclear entities and U.S. companies.” Will this development be the mechanism that breaks the logjam that has prevented the U.S.-India deal from fulfilling its true potential? If only it were so simple.
At the conclusion of the civil nuclear deal in 2008, there were approximately 200 Indian entities on the so-called “Entity List” kept by the U.S. Department of Commerce. In general terms, U.S. companies are prohibited from doing business with companies on this list unless a special licence is granted. In practice, such licences are seldom granted. After the U.S.-India civil nuclear deal, all but a handful of Indian companies dealing with nuclear matters were removed from the list. This was one of the benefits of the deal. Among those remaining, were those that were mainly involved in research and development and thought to involve the risk of nuclear technology leakage into military uses and other security issues, including leakage to Russia and other adversaries of the U.S. Mr. Sullivan, in his speech in New Delhi, made oblique reference to this concern when he said, “As we see more and more new technologies diverted to unfriendly actors, the United States and India will also need to ensure that valuable dual-use technologies don’t fall into the wrong hands. This means aligning our export control systems….”
Apparently, the Biden Administration decided that the few remaining Indian nuclear entities on the U.S. Entity list no longer present the kind of security concerns that landed them on that list in the first place. This is all well and good and can be considered progress, although it remains to be seen whether the security and foreign policy agencies under Mr. Trump will agree with that assessment. However, this is not the heart of the problem preventing the U.S.-India civil nuclear deal from reaching its full potential.
The liability risk issue
In 2010, India enacted the Civil Liability for Nuclear Damage Act. This Act was fuelled in Parliament by those who had lost the attempt to block the deal and their anti-foreigner rhetoric, including invocation of the infamous Bhopal/Union Carbide tragedy. The result was India departing from international civil nuclear liability norms and placing major liability obligations not on the operators of a civil nuclear facility but on the suppliers. Neither of the major U.S. suppliers — GE and Westinghouse — was willing to assume these liability risks, and neither the U.S. nor India was willing at that time to step in to ameliorate these liability concerns.
The Indian Government did attempt later to provide some relief from liability risks in conjunction with the resumption of Russian participation in the Indian civil nuclear expansion. Through India’s public sector General Insurance Corporation, and four other government companies, a 20-year insurance premium would be charged to cover the supplier’s liability for an accident. The Russians accepted this risk amelioration in large part because their overseas civil nuclear entities are government owned, will have a defence of sovereign immunity, and in any case will be protected by the Russian government from liability that might otherwise put them out of business. And the Russians saw their increased participation in Indian civil nuclear development as bearing significant geopolitical dividends. The Russians are now moving forward with India on civil nuclear expansion. The U.S. companies have been unwilling so far to accept this insurance amelioration. Thus, the Trump administration will have to find means to cut the Gordian knot of liability before there will be significant U.S. company involvement in Indian civil nuclear expansion.
Hurdles such as technology, consumer costs
There are other significant barriers to the full involvement of U.S. companies in Indian civil nuclear expansion that have arisen since the 2008 conclusion of the U.S.-India civil nuclear deal. Civil nuclear technology has evolved rapidly. For U.S. companies to be fully involved, they must show that they can offer the latest technology. Most importantly, this technology and its implementing equipment must be offered at a reasonable price that will not increase electricity costs to the Indian consumer. Indian civil nuclear officials are acutely aware of the disastrous cost overruns that have doomed the latest civil nuclear facilities in the U.S. and left ratepayers to shoulder unwelcome costs without improvements in either quantity or quality of services.
All these challenges limit the full fruition of the U.S.-India civil nuclear deal. But they cannot be met by U.S. companies acting alone. The Trump administration can work with Indian and U.S. nuclear companies not just on regulatory issues but also those involving liability, technology, and cost as well. The hour is late, but the benefits to seizing the full promise of the U.S.-India civil nuclear deal will be tremendous.
Raymond E. Vickery, Jr. is a Senior Associate (Non-resident) at the Chair on India and Emerging Asia Economics, Center for Strategic and International Studies (CSIS), Washington, DC. He also worked with the Coalition for Partnership with India on the U.S.-India Civil Nuclear Initiative. He previously served as Assistant Secretary of Commerce for Trade Development, where he launched the U.S.-India Commercial Alliance.
Published – January 22, 2025 12:16 am IST
