U.S.-INDIA NUCLEAR DEAL - Twist in the tale?

The cautious and coordinated release of information regarding the final draft of civil nuclear agreement between the US and India has the leaderships, lobbyists, analysts, and media in both countries in a tizzy for the past one week. As the discussions on atoms for peace and trust between the two countries proceed in coming months, three sequential steps will play out – viz., informal political approval in India; formal approval by U.S. Congress; and, lastly lifting of sanctions on India by the Nuclear Suppliers Group. Each of these steps, though surmountable, comes with its typical nuance.

A historic deal that will significantly impact the world order in 21^st century – not immediately, but in incremental steps over time – the 123 agreement is yet in its birth pangs. The fast paced developments of last week, have however thrown up some very intriguing aspects – and this article attempts a speculative approach to the core issue of sanctions on India in case it tests a device in the future.

As of now, under the U.S. Atomic Energy Act, and the Hyde Act, there is no way that India can avoid sanctions if it conducts a test in the future. Sanctions will imply a cut-off of future cooperation, as well as the U.S. administration will be required to demand return of materials which are of U.S. origin. In such a scenario, how can the Indian government square with its people that its investment of billions of dollars, and energy supplies, will not be jeopardized if India conducts a test in future?

The Right-sourcing Strategy

The answer may lie in a simple but imaginative right-sourcing strategy – do not procure materials and equipment from the U.S. If India does not buy equipments and fuel from U.S. suppliers, then its investments and energy security are not dependent on any U.S. action subsequent to a test in the future. By procuring its supplies from countries other than the United States, India will insulate itself from the downside of U.S. sanctions, return of materials, and such.

In the absence of any other compelling rationale by the government of India to assure that its investments will not be prejudiced in the future, right-sourcing seems to be the only mechanism that will enable informal political approval of the 123 deal in India. Such a strategy to deepen strategic relations with the United States, yet not be dependent on U.S. supplies, will also dovetail neatly into India’s strategic worldview where it sees an emerging balance of powers in the global order of 21^st century.

The U.S. government may well be aware of this strategy, and its willingness to sacrifice narrow commercial interest of one particular industry in order to obtain a broader political and economic partnership with India may be unique in annals of American history, and speaks of the vision and stakes at hand.

In a world where the United States is faced with a mercurial Russia, an inscrutable China, the worldwide seepage of Islamic terror, and a schizophrenic and tottering Pakistan, there is simply no other nation with India’s size and democratic ethos to counterbalance the myriad challenges of the 21^st century. The overriding strategic context of the relationship with India is compelling enough for the U.S. administration to term the 123 deal as a matter of “national interest”.

The calculus for India

The Indian parliament is expected to discuss the nuts and bolts of the 123 agreement on the 13^th of August. With the issue of reprocessing seemingly resolved to mutual satisfaction, the only other issue of substance on which the right wing opposition, the government’s communist allies, and many amongst its own party, will zero in, will be the hypothesis of a nuclear test in future. A failure on the part of the government to satisfy the naysayers on this count will be disastrous since the issue can snowball with political and nationalist rhetoric.

The only way out for the Indian government to declare that it has not compromised its sovereign right to test, may then require it to articulate the above said right-sourcing strategy and thereby win their support for the deal. Once out of the dog-house, India can then mitigate its risk of U.S. sanctions by sourcing its fuel and equipments from nations other than the United States. Moreover it may look only at fuel supplies in the first instance, and source the equipments as and when needed.

As Robert Kennedy once famously said, one-fifth of the people are against everything all the time, but if more than that oppose the deal in India, then the government may have to spell out its right-sourcing strategy. Such a strategy also insulates Indian foreign policy from unforeseen pressures in future to align with U.S. on matters where it may hold divergent views. Successful passage of the 123 deal will catalyze unprecedented growth in strategic and economic relations between the two countries, while at the same time India will not be encumbered by a dependency which can influence its independent foreign policy.

The economics for Corporate America

There is no doubt that American business has been one of the main forces in favor of the deal, and India’s adoption of such a right-sourcing strategy might kick off a storm in corporate America. Such a response will be myopic, for, if the speculation is sound, then it is only the nuclear industry that may lose out, while the sum total benefit to all other industries from a newer paradigm of U.S.-India relations will easily outweigh the loss to American nuclear industry.

If, on the other hand, the government of India is not able to defend its case in the Indian parliament, then the whole deal may be off. Thus the economics for corporate America boils down to this – is it better to have a deal which would provide a major boost for American business in India, albeit without participation of American nuclear industry; or have no deal at all? This is not to say that the nuclear industry will completely miss the boat, for it can innovate and be a player in the Indian market – perhaps something like the Japanese nuclear industry which has structured so as to overcome its domestic compulsions, and still is a serious player in world markets.

Beyond the economic calculus, the 21^st century demands an overarching strategic calculus between nations – for how will the global markets thrive and entrepreneurs profit unless there is security and freedom in the markets? The 123 deal between the U.S. and India is a bold attempt to create a paradigm that will help peace in our homes, and ensure a more benign scenario for American, Indian, and other businesses to operate in free markets globally.

The era of atoms for peace is over – now it is about atoms for peace and trust.