By JAYSHAL SOOD
Observer contributor
April 9, 2008

With its second term winding down, the Bush administration is hustling to close the U.S. –India nuclear deal, which was proposed by the U.S. in 2005 and is expected to create a $100 billion nuclear industry market.

The whole play is being performed on a strange stage. Although India is not a signatory to the Nuclear Non-Proliferation Treaty, the Bush administration went ahead and promised the deal. The motivations were so strong that the administration could not even wait to consult Congress.

“Perhaps the executive branch was trying to establish a sort of legacy accomplishment to the extent that the U.S.-India nuclear deal could transform bilateral relations into a strategic partnership or even some day an alliance,” said Robert Zarate, research fellow at Nonproliferation Policy Education Center in Washington. “Then this deal would be a legacy type of accomplishment. However, it’s far from clear if this is going to happen.”

The Indian Planning Commission in an integrated energy policy has set a target to lift electricity generation capacity through nuclear means from a mere 3,000 MW at present to 63,000 MW in the next 25 years, which alone will require new plant investment of more than $100 billion. So the Indian private sector and U.S. industry pounced to grab this lucrative opportunity.

Several reasons have been cited for the eagerness of the Bush administration to promise such an agreement. Some say America is trying to align India to counter the growing influence of China in South Asia. But the most resonant view is that the administration is trying to set up an exception for India to facilitate the U.S. nuclear industry.

“The nuclear industry here [U.S.] is in the private sector. There is GE [General Electric] and other companies which are interested in making investments in India. So, making this agreement would facilitate larger investment opportunities,” said Khalil Hashmi, first secretary, Pakistan’s Mission to UN.

General Electric is the third-largest spender on lobbying in the U.S. The conglomerate has spent more than $163 million in lobbying since 1998 according to the Center for Responsive Politics, a District-based research group. During the Indian prime minister’s visit to Washington in July 2005, Bush pledged for “expeditious consideration of fuel supplies for safeguarded nuclear reactors at Tarapur [General Electric’s nuclear reactor in India],” according to a Reuters report.

In the past few years U.S. companies have visited India to explore the country’s nuclear market. The main goal was to identify possible options to set up strategic alliances with the Indian companies. A delegation of 38 major U.S. companies visited India in March 2007. Eighteen of these companies are in the civil nuclear industry. The trip was organized by U.S. Chamber of Commerce’s Senior Vice President for International Affairs Dan Christman and U.S.-India Business Council’s President Ron Somers.

General Electric and Westinghouse were part this delegation. An official from Westinghouse, a nuclear reactor manufacturing company, said that the visit helped the company to study the needs of the nuclear power plant market in India. The company is already looking for local partners.

“We rely very closely on in-country partners as well. So we have a very strong commitment to localization and technology transfer. So we feel that we would be able to do business in a manner that would be beneficial to all parties,” said Westinghouse’s spokesman Vaughn Gilbert.

He declined to comment on how much business the company is expecting in India. Meanwhile, the Indian industry has responded positively to U.S. industry efforts.

The Confederation of Indian Industry, a non-profit organization which represents some of the biggest Indian companies, was among the top international organizations funding travel trips of American lawmakers. Between 2000 and 2005 the organization spent nearly $540,000 on trips to “educate” members of U.S. Congress about the growing energy needs in India.

The confederation sponsored at least 80 trips for congressional travelers which included more than 50 staffers, according to a review of congressional disclosure records conducted by the Center for Public Integrity. The organization hired one of the top lobbying firms in Washington – Barbour, Griffith & Rogers. The aim was to persuade members of the Congress to endorse the U.S.-India nuclear deal.

The organization, however, claims it did not realize that its efforts fall under the broader radar of lobbying until 2005 – when it filed its first lobbying forms. “You know that’s also a very odd registration (FARA), I must tell you. We only registered for that one year. And it was done by the group (Barbour, Griffith & Rogers – U.S. lobbying group). We had recruited the group not for lobbying. We recruited the group to help us with the educational process … we don’t want to be registered as lobbyists,” said Kiran Pasricha, deputy director general of Confederation of Indian Industry.

Pasricha said the confederation’s main purpose in the U.S. is to build strong business relationships between the two countries, and those efforts should not imply lobbying intentions.

However, in the absence of any formal bilateral agreement between the two countries it remains unclear that the U.S. companies would have a preferential treatment in getting the Indian nuclear plant contracts. Many other countries, such as Russia, France, Canada and Japan, have shown interest in equipping India with nuclear technology and fuel.

Proponents of the deal say the agreement would not influence India’s decision to choose the most economical suppliers. “There is absolutely no connection between the deal and India asking U.S. companies for contracts. There is no connection and no commitment on behalf of India on that front,” Pasricha said.

Vibhuti Hate, a research associate of South Asian program at Center for Strategic and International Studies echoed those views.

“India has made that very clear repeatedly that there cannot be any strings attached. And India’s foreign policy has to be exactly India’s foreign policy; not U.S. foreign policy and not a reflection of U.S. foreign policy,” Hate said.

Critics say India would have to oblige the U.S. by sourcing contracts to its companies.

“Of course there is always that quid pro quo. Commercial motivations are a major element of the deal. That’s for sure. That’s another thing that as a spin off, as a byproduct, other countries would be encouraged,” Hashmi said.

Trade-offs are not uncommon in these situations. And in such a situation the business groups from both countries might feel it is a win-win agreement.

The deal, however, may send a wrong signal to other countries in South Asia, particularly Pakistan.

“The clearest manifestation would be that Pakistan will have no choice but to build its fissile material,” Hashmi said.

The final outcome of the deal would depend on how quickly the Indian government can coax political parties at home to create consensus. If the Indians want the deal they would have to send it to the U.S. Senate by June at the latest – before the Senate goes out of session in the middle of the summer. But before the deal gets to the Senate it has to pass through International Atomic Energy Agency and Nuclear Supplier’s Group for their approval.

Nuclear Supplier’s Group is a multinational body whose main goal is to reduce nuclear proliferation by controlling the export and transfer of materials applicable to nuclear weapon development. This group may either exempt India from its rule that non-signatories of Nuclear Non-Proliferation Treaty cannot import nuclear fuel and technology, or may stick to this rule.

If the Nuclear Supplier’s Group exempts India from its rule, then the question arises: What form would this exemption take? Will it be the exemption that singles out India or will it be a criteria based exemption which is rendered in such a way that India fulfills this criteria, and some day other countries like Pakistan or Israel could satisfy this criteria.

In both the situations, however, one thing seems evident: economic interests can trigger irresistible motivations of powerful nations to propose exceptional rules on issues as important as nuclear fuel and technology.