South Asia Program

The US-India 123 Agreement: From Bad to Worse

August 23, 2007

Bad agreements usually only get worse when implemented, and the U.S.-India civil nuclear cooperation agreement appears headed in this unfortunate direction. The bilateral “123 Agreement” completed in August, 2007 implementing the Hyde Act may have harmed the coalition government in India led by Prime Minister Manmohan Singh, as parties from both ends of the Indian political spectrum are displeased with the deal.

There is much in the 123 Agreement for Capitol Hill to dislike, as well. The Bush administration has clearly disregarded the legislative intent behind several key provisions of the Hyde Act. Congressional hearings can clarify if the 123 Agreement has also contravened public law while reaffirming safeguards against proliferation that Capitol Hill clearly sought alongside improved bilateral relations with India.

For the better part of three years, the U.S.-India civil nuclear cooperation agreement has been the top South Asia agenda item for the upper echelons of both countries. National leaders chose the most difficult of subjects in order to break decades of mistrust. This was an odd and unfortunate choice, given the region’s other opportunities and dangers. The previous Indian government -- led by the same BJP leaders who now oppose the deal -- showed poor judgment in making nuclear cooperation the litmus test of bilateral relations, and the Bush administration compounded this error by trying to change the rules of nuclear commerce – but only for a friend.

The key stakeholders in the Nonproliferation Treaty have different friends. They also stand to make profits in nuclear commerce. If crucial stakeholders demand exceptions for their friends, and place profit-taking above nonproliferation norms, the global system created to prevent proliferation will be battered.

The down-side risks of this deal are now becoming clearer, and will become even more evident by parsing the tortured language of the 123 Agreement. The governments of Manmohan Singh and George W. Bush appear to be interpreting key provisions of the agreement very differently, which can only cause more ill will and headaches in the future.

One area of potential dispute relates to the consequences of the resumption of nuclear testing by India. U.S. public law is clear in this regard, but the Government of India finds solace in pledges that the Bush administration has given to cushion this potential blow. One provision in the 123 Agreement pledges to provide India, one way or another, with an ample fuel bank to guard against disruption caused by nuclear testing. The legislative intent of the Hyde Act, most clearly spelled out in colloquies among Senators Lugar, Biden and Obama and Congressmen Lantos, Royce, and Spratt, places clear constraints on fuel supplies.

The Government of India’s next step – assuming that it disregards the view of its coalition partners from the Left not to proceed further with implementing the deal – is to negotiate a safeguards agreement with the International Atomic Energy Agency. New Delhi has insisted that this agreement be “India specific,” implying that if fuel is disrupted, safeguards can be dispensed with. In this regard, the 123 Agreement makes reference to India’s right to “corrective measures” if fuel supplies are interrupted. It also includes a clause that the United States would assist India in its dealings with the IAEA. It is very likely, however, that the IAEA will insist on safeguards in perpetuity, without conditions or reference to disrupted fuel supply.

These and other implementation provisions are bound to cause greater difficulties within India and further fray relations with the United States once it becomes evident that the 123 Agreement has papered over differences in interpretation, while disregarding congressional intent to reduce the deal’s negative proliferation consequences. The chart below lists a few of the key provisions of the Hyde Act, the clear legislative intent of the Congress, and the relevant language of the 123 Agreement.

The Bush administration is inclined toward historic, game-changing, geo-strategic initiatives. The proposed U.S.-India deal certainly fits this mold. This bold maneuver was launched with great fanfare and had immediate political appeal. But it was ill-advised and poorly executed. Payments for poor judgment are now coming due.

	The Hyde Act:	Legislative Intent:	123 Agreement:
Fuel Assurances:	"...civil nuclear assistance to India will not directly, or in any other way, assist India's nuclear weapons program...”	Senator Obama: "Is it the managers' understanding that provision of a fuel to the Government of India should be sized in a way to maintain a deterrent to Indian nuclear testing...in other words, is it your understanding that providing a fuel reserve to India is not intended to facilitate a resumption in nuclear testing?" Senator Lugar: "Yes, that is our understanding."	"The United States is willing to incorporate assurances regarding fuel supply in the bilateral U.S.-India agreement...The United States will join India in seeking to negotiate with the IAEA an India-specific fuel supply agreement. The United States will support an Indian effort to develop a strategic reserve of nuclear fuel to guard against any disruption of supply over the lifetime of India's reactors...If despite these arrangements, a disruption of fuel supply occurs, the United States and India would jointly convene a group of friendly supplier countries...to pursue such measures as would restore fuel supply to India."
Technology Transfers:	"No item subject to [the 123 Agreement] may be transferred to India if such transfer would violate or be inconsistent with the transfer guidelines of the NSG..."	"[It] is necessary to ensure that no sensitive nuclear technologies related to the enrichment of uranium...the reprocessing of spent fuel...or the production of heavy water...are given to India..." -- Senate Foreign Relations Committee Report	"Sensitive nuclear technology, heavy water production technology, sensitive nuclear facilities, heavy water production facilities and major critical components of such facilities may be transferred under this Agreement pursuant to an amendment to this Agreement."
IAEA Safeguards:	Requires a Presidential determination that India and the IAEA have concluded a safeguards agreement "in perpetuity in accordance with IAEA standards, principles and practices..."	"Our bill...requires the President [to] determine that India has...concluded a safeguards agreement with [the IAEA] that will apply safeguards in perpetuity to India's civil nuclear facilities, materials, and programs." -- Congressman Henry Hyde	"...an India-specific safeguards agreement will be negotiated between India and the IAEA providing for safeguards to guard against withdrawal of safeguarded nuclear material from civilian use at any time as well as providing for corrective measures that India may take to ensure uninterrupted operation of its civilian nuclear reactors in the event of disruption of foreign fuel supplies. Taking this into account, India will place its civilian facilities under India-specific safeguards in perpetuity..."

Michael Krepon is the Co-Founder of the Stimson Center.