Jul
22
Do we need the nuclear deal with the US?
Filed Under Globalization, Indian Economy, World Economy | Leave a Comment
The new nuclear bargain means different things to different people, both here and in the United States — a case of the elephant and the blind men!
Dire consequences to our national security are forecast by our strategic community because we would have access to nuclear power trade and international cooperation.
So the first question that we must address is: Why do we need international cooperation in nuclear power, and what would be the bargain?
To begin with, we all know how deficient the country is in total energy as well in electricity. We have a lot of coal, but it has a very high content of ash (which requires technology and capital to improve it) and is a serious environmental problem. Meanwhile we import better quality of coal from Australia.
With the rising consumption in the country, we will be importing over 90 per cent of our oil and gas needs in a few years, mostly from unstable regions to the west of us. This has its own vulnerabilities. Oil prices have soared in the past two years and are likely to keep hovering with obvious negative impact on our economy.
Energy deficient countries like Japan, France etc. had to rapidly build nuclear power capacity after the oil shock of 1973. China now is building its nuclear power base from near-zero capacity to 40,000 MW of electricity by 2020.
We have an ambitious plan to build 20,000MW of nuclear power by 2020. But our indigenous uranium reserves can support, at best, a capacity of only 10,000MW!
If we want to increase our nuclear power capacity to even the targeted figure, we will need to import fuel for decades till the fast-breeder reactors are able to take over.
The NDA government was fully cognisant of this, and that is why it had included ‘nuclear energy’ as the first item for cooperation with the United States under the NSSP (Next Steps in Strategic Partnership) agreed upon in January 2004 by then prime minister Vajpayee and negotiated by then National Security Adviser Brajesh Mishra, which have been praised so much and for which they took so much credit — only to slam it now that those steps are moving forward!
The second big question is: Does this agreement jeopardise our national security?
Continuation of Pro-US shift: Left Parties
Enhancing nuclear power availability in the country would actually enhance national security since it would help economy to grow, reduce poverty and build national comprehensive power. What is less known here is that nuclear power now has become the most economical, most environmental friendly and most reliable form of energy among various types available for commercial use.
But there is no way we can access international cooperation, especially fuel for reactors, without some adjustments in our policies. What we are expected to do beyond the traditional policy of the country is that
i. We will assume all responsibilities and practices (and acquire same benefits and advantages) as other nuclear weapon states like the United States;
ii. we will separate civil and military nuclear facilities and programmes in a ‘phased manner’ and ‘voluntarily’ place them under IAEA inspections;
iii. sign and adhere to an Additional Protocol with IAEA covering such civilian nuclear facilities.
Third, what would be the implications, especially for our nuclear deterrence capabilities?
The loudest objections in the country have been that separation of civilian facilities from the military facilities would undermine our nuclear defence capability. Nothing could be farther from the truth.
We have never had any problem with placing civil nuclear power reactors under IAEA inspection system (Tarapur was voluntarily placed under such inspection in 1993 when our treaty obligations expired). The two Russian supplied reactors near Chennai are under IAEA inspections, and so are the Kota reactors.
The point is that we have an efficient autonomous capability to manufacture nuclear weapons and the facilities for this all would obviously not be placed under any international oversight. But the civil nuclear power reactors built with any international cooperation component would have to be under IAEA inspection and it is crazy to claim that this jeopardises our security.
President Bush has given up the long-held US demand for India becoming a non-nuclear weapon state and in fact put India at par with the US in this respect for nuclear energy cooperation.
Fourth, would this agreement go through, and if not, would it then leave us high and dry with commitments that regress from our present positions and capabilities?
There is no doubt that Bush would find it an uphill task to get the necessary legal authority and international concurrence to the proposal. But he also has the bulk of his second term ahead of him.
US Lawmakers say N-deal will be a tough-sell
A joint working group to progress this agreement has already been set up, and senior US officials have been speaking to Congress and US allies. First reactions are fairly positive and 100 Senators and Congressmen at a convention of the Indian American Friendship Council the other day have promised to make the nuclear deal a reality.
President Bush and Prime Minister Singh will meet early next year to review the progress, and the personal role of the US president would matter greatly. If for any reasons the new enterprise does not go through, India still gains by being labelled as a ‘responsible State with advanced nuclear technology’ (read ‘State with nuclear weapons’). Surely, that is not something that we should be complaining about?
Fifth, what does the US get out of what is obviously a major shift in its policy?
Indo-US Nuclear Treaty: A Good Deal
The answer to this lies in the macro picture of global trends.
The obvious incentive is the burgeoning market (growing at an impressive rate) of a liberal democracy of over a billion people. But the second Bush administration is also seeking to re-orient its grand strategy after experiencing the negative fall-out from its first tenure. It is badly bogged down in Iraq while it is unable to get enough recruits for its army. Central Asian leaders are seeking its military withdrawal from the region at an early date.
But above all, Washington is finally beginning to readjust its strategy in the context of what has come to be accepted as the ‘rise of China.’ New tensions have been building in US-China relations in recent months. High-level Chinese generals have been publicly threatening America with ‘hundreds of its cities’ being burned by Chinese nuclear weapons if there is US-supported conflict over Taiwan.
Above all, there has been a growing realisation of a global power shift from the West to the East, where China stands out as the rising superpower. The US National Intelligence Council in its projection for the next 15 years raised the issue of how the US would manage the rise of China and India in the coming decade.
By any logic, a successful and prosperous India would be a natural balance to China even while the two remain friendly; and strong India-US relations are crucial to Bush’s stated goal of supporting India’s rise to global power status. But the nuclear and the contradictory policies of the two have been at the core of their divergences for three decades.
Without finding a way out — or around them — the relationship would continue to be severely limited.
Jul
21
Does N-deal Really Solve India’s issues?
Filed Under Globalization | 1 Comment
Instead of coming out clean on the text of the agreement by making it public, both India and the US in collusion have chosen to keep it under wraps and are selectively issuing rosy statements that all is well and all our concerns have been fully addressed.
While one wishes it is really satisfactory, it is unfortunate that the Cabinet committees, the political parties and the public are deprived of constructive analyses and unbiased expert opinions.
What we are fed up with is one-sided interpretation of the text by the official side though there is promise that the text will be made public soon in consultation with the US.
If the July 18, 2005 joint statement where India was lifted to the moral high ground is kept by the side of the Hyde Act, a legally binding document based on which the 123 Agreement will largely actually be implemented, it is not difficult to see to what extent India has been given the same rights and privileges of a Nuclear Weapons State.
As just one example, while a Nuclear Weapons State can voluntarily place under civilian list any of their nuclear facilities and exclude any facility as military facility and make changes at will, India was made to fight for every facility during the preparation of the separation plan.
Also, the safeguards’ implementation as far as Nuclear Weapons States are concerned is hardly intensive and India can never hope to get that sort of parity judging by many of the stipulations in the Hyde Act.
It is to be expected that while negotiating a bilateral agreement there will always be constraints on both sides. However, in this case it is the US, by passing the Hyde Act disregarding the concerns expressed by Prime Minister Manmohan Singh and his commitments to Parliament has left India to compromise.
More than the substance, the negotiators seem to have concentrated more on fixing the language to make the text look palatable on paper.
So far we have only the negotiators’ interpretation of the deal without the access to how the various issues are actually worded. The government seems to be working on garnering support from various quarters to gain psychological advantage before releasing the text.
The reprocessing issue is still confusing.
Contrary to what is being told in the briefings there seems to be conditional clearance with actual bottlenecks still not being fully removed. This is where the text is important to really ascertain whether our interests are fully protected.
It is reported that the Japanese model is followed. If it is so, it is not too pleasant in practice. They have in the past suffered under the US restrictions.
On the issue of the fate of the cooperation agreement in case of testing, there is no ambiguity as far as Hyde Act is concerned. What seems to have been achieved is language couching, vague complex wordings to circumvent and give an impression of having adequately addressed the issue.
This is nothing but absolute fooling!
When implemented in the present form, there is no doubt that in future any government in power will be constrained to decide in favour of testing having dug deep into foreign investments in nuclear power plants and pressures on the political and economic fronts among others.
The government during the negotiations may be under advice from certain influential quarters that actual testing could be replaced by computer simulation. This is a dangerous prospect indeed! On this issue there seems to be no escaping the Hyde Act and supreme national security concerns.
On the issue of full civilian nuclear cooperation it is amazing to see the new definition given by the spin-masters on both sides. What is simple and straight forward at least in definition is being made to look oversimplified. Part cannot be full as US wants to define.
If recognising our strategic programme, allowing us to import reactors and fuel and have the right to reprocess and enrich uranium and also export heavy water through our own efforts could constitute full civilian cooperation, what is the big deal?
It is being argued that we have the technology in the entire fuel cycle and why do we bother? If it is so, we have the technology for designing, building and operating reactors. Why are we going in for this technology import?
Are we getting over the embargoes on import of equipment and components and any other materials on all parts of the fuel cycle, specifically including enrichment, reprocessing and heavy water, flagged by the Hyde Act or restricted to only those parts of the fuel cycle like reactors which are of commercial interest to suppliers?
There seems to be a calculated move to denigrate critics who really care for long term interests in energy and national security of having defeatist mentality and paranoid about the deal.
They should bear in mind that some critics among former nuclear scientists have spent their professional careers in the nuclear establishment and helped build a strong foundation showing achievements as a consequence of which India has been able to stand up with its head high.
India could not have been discussing this deal without their contribution. They do not have any vested interests nor need for protecting the chair they once occupied. Their only interest is to see that the inherent strength of the country in the nuclear field is suitably harnessed to grow even stronger.
Weakness of Uranium shortage is a known factor and it has been factored into the Indian nuclear programme for more than five decades now. Long term energy independence cannot be driven by externally controlled imports. Thinking ahead and cautioning against hasty actions detrimental to national interests cannot be termed inferiority complex.
A deal, which can truly takes us out of the shell and allow us to interact as a global player on honourable terms, is always welcome. We should not be treated as receivers of technology but we are capable of offering a lot in the nuclear field.
Let us not consider ourselves as weak partners in this game and compromise. We should stand up fight for our rightful place.
Jul
21
Amidst lots of recent controversies over Indo-US nuke deal, here are some points which could have nuke deal as positive fallout. India, specifically India’s people and India’s businesses had the most to gain from the US-India nuclear agreement. The fact that this is not self-evident to many Indians speaks volumes about the trust deficit remaining between the United States and India, as well as India’s lingering insecurity concerning its role on the world stage.
From an Indian perspective, what exactly does the nuclear deal accomplish? The direct benefits to India are three-fold: Increased energy diversity, greater access to technology and the potential for newer and deeper strategic partnerships.
As anyone who has experienced India’s infamous 18-hour power cuts can tell you, its people and its burgeoning businesses are badly in need of stable, assured energy sources. This will require a diversification of India’s energy options, including more efficient fossil fuel use, the harnessing or import of greater amounts of hydroelectric power, and the development of renewable energy sources such as wind and solar power, in addition to greater investments in nuclear energy. Nuclear energy currently accounts for a pitiful 3 per cent of India’s overall energy, despite a sizeable nuclear infrastructure. The deal could greatly increase that figure in the coming decades.
Technologically, India has been denied access to vital scientific know-how since its nuclear weapons test in 1974. The technological denial has applied not only to expertise related to civilian nuclear energy, but also to various ‘dual-use’ technologies, such as propulsion and electronic systems, which could theoretically be used for military purposes. It has applied even to a range of seemingly innocuous agriculture- and health-related technologies. The nuclear deal explicitly and implicitly eliminates these technological barriers.
Lastly, the deal gives India an elevated standing in the global nuclear and political order, not quite on par with the five Nuclear Weapon States designated by the Non-Proliferation Treaty, but nevertheless, a far greater standing than it has ever enjoyed before. The removal of technological barriers and the development of at least one crucial sector of the economy could in turn lead to greater and deeper economic and strategic ties not just with the United States, but also with Russia, Europe, China and Japan.
These three primary benefits for India from the nuclear agreement could, in turn, have a ripple effect. The US-India relationship is expected to improve along many dimensions in multiple sectors in the coming years, leading to increased trade in goods, greater investment in a diverse range of industries, and further social and cultural exchange between the two countries.
To some extent, such improvements are taking place already, regardless of the nuclear agreement and the agreement’s impact on these fields will consequently be difficult to gauge. However, two specific aspects of the US-India relationship, with similarly tenuous connections to the nuclear agreement, may yet prove indirect beneficiaries of the deal.
The first will be greater commercial and technological opportunities in the defence sector. The US military industrial complex is already looking at India as a money-spinning market for its weapons systems. Of course, India, as the world’s largest purchaser of military equipment, has no obligation — legal or otherwise — to buy American defence equipment. In fact, India will most likely continue to buy cheaper Russian and Israeli products whenever available, as they may be enough to ensure technological parity, if not slight superiority, vis-à-vis its two major competitors, China and Pakistan.
However, the option of buying American defence equipment is now on the table, and in some cases at least, the Indian government would be wise to take advantage of this opportunity. This does not mean that India should necessarily grant the multi-billion dollar contract for 126 medium multi-role combat aircraft to an American company. But India’s war-fighting machinery could benefit enormously from such acquisitions as superior night vision, better communications technology and more sophisticated electronic warfare systems.
The Indian military, which has pitiful little say in the choice of equipment purchased, is keen to acquire high-quality American products, many of which are denied to the Chinese and Pakistani militaries. The purchase of select American equipment could therefore see India gain a sizeable military-technological advantage over its regional competitors.
A second indirect benefit to India could be in the education sector. Some 20,000-odd Indian students, academics and researchers have been flocking to the United States each year for the past decade, and US universities are likely to remain the world’s pre-eminent institutions of research and learning. However, Indian scientists have so far been prevented access to, or discouraged from cooperating in, sensitive nuclear-related and other high-technology fields.
The nuclear agreement can potentially eliminate this knowledge embargo, allowing interested and competent Indians to study and conduct further research in top US universities. Some will almost assuredly settle in the United States and contribute to that country’s scientific establishment as part of the inevitable brain drain. Others, as recent migration trends have begun to show, will likely return to India with top-notch academic credentials and experiences and would prove valuable additions to their native country’s scientific establishment. As the Chinese are so fond of saying under such circumstances, a more robust scientific and academic relationship between the United States and India could prove to be ‘a win-win situation.’
The biggest remaining impediment, both to the consummation of the agreement and India’s ability to reap its fruits, is the trust factor. Understandably, Indians have historically had reasons to mistrust the United States. They remember the Tarapur episode following India’s 1974 nuclear explosion, as well as the turnaround in US support for India between 1965 and 1971. More recently, they read about the United States considering reneging on F-16 parts to Hugo Chavez’s hostile Venezuela. The nuclear deal, offered seemingly altruistically by the US to India, is in part an effort to assure Indians that the United States can indeed be trusted.
Enduring distrust of the United States is substantiated by lingering Indian insecurity and suspicion in its foreign policy, frequently bordering on paranoia. As C Raja Mohan noted in light of the 123 Agreement between the US and India, ‘It is a long political tradition in India to look for secret clauses in bilateral agreements.’ But India is no longer the weak, impoverished country it was in 1974, nor is it an oil-rich but petty state like Venezuela.
As a fast-growing economy and the fourth largest military power, India’s ventures in foreign policy — be they concerning Iran, Nepal, Pakistan or even Fiji — should scarcely be fraught with such hesitance or trepidation. The boldness of the nuclear deal could provide a much-needed boost of confidence to a country which, at 60, is only now learning to tightrope across the world stage without the safety net of the United Nations or the Non-Aligned Movement.
It should be noted that US-India relations were not always laden with such mutual suspicion. Indians often conveniently forget that a warmer US-India relationship, which included cooperation and alignment on Tibet and China, existed until the Indo-Pakistan war of 1965. The US and its institutions were also among the prime technological and scientific contributors to India’s ‘Green Revolution’ and its subsequent agricultural self-sufficiency.
While some opinion contributors in the Indian press have descended to questioning the patriotism of the proponents of the nuclear deal, a glance at the wide-ranging benefits of the agreement for common Indians clearly demonstrates in whose best interests the deal was arranged. Many of these critics — Cold War atavists — appear sadly negligent towards the needs of India’s people and overlook the plain facts about the US-India relationship.
Today, India sends more students to the United States than any other country, Indians regularly think more favourably of the United States than citizens of most other countries do, and the United States remains India’s largest trade partner. Arguably, the nuclear agreement is an attempt by both governments to improve their relationship to a level comparable to the relationships between their people and between their business communities. Indian mistrust of the United States, once synonymous with its foreign policy, is clearly a sentiment belonging to the past.
Jul
18
Highlights of Indo-US nuclear deal
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Following are the key aspects of the Indo-US civil nuclear deal:
* The agreement not to hinder or interfere with India’s nuclear programme for military purposes.
* US will help India negotiate with the IAEA for an India-specific fuel supply agreement.
* Washington will support New Delhi develop strategic reserves of nuclear fuel to guard against future disruption of supply.
* In case of disruption, US and India will jointly convene a group of friendly supplier countries to include nations like Russia, France and the UK to pursue such measures to restore fuel supply.
* Both the countries agree to facilitate nuclear trade between themselves in the interest of respective industries and consumers.
* India and the US agree to transfer nuclear material, non-nuclear material, equipment and components.
* Any special fissionable material transferred under the agreement shall be low enriched uranium.
* Low enriched uranium can be transfered for use as fuel in reactor experiments and in reactors for conversion or fabrication.
* The ambit of the deal include research, development, design, construction, operation, maintenance and use of nuclear reactors, reactor experiments and decommissioning.
* The US will have the right to seek return of nuclear fuel and technology but it will compensate for the costs incurred as a consequence of such removal.
* India can develop strategic reserve of nuclear fuel to guard against any disruption of supply over the lifetime of its reactors.
* Agreement provides for consultations on the circumstances, including changed security environment, before termination of the nuclear cooperation.
* Provision for one-year notice period before termination of the agreement.
* The US to engage Nuclear Suppliers Group to help India obtain full access to the international fuel market, including reliable, uninteruppted and continual access to fuel supplies from firms in several nations.
* The US will have the right to seek return of nuclear fuel and technology.
* In case of return, Washington will compensate New Delhi promptly for the “fair market value thereof” and the costs incurred as a consequence of such removal.
* Both the countries to set up a Joint Committee for implementation of the civil nuclear agreement and development of further cooperation in this field.
* The agreement grants prior consent to reprocess spent fuel.
* Sensitive nuclear technology, nuclear facilities and major critical components can be transferred after amendment to the agreement.
* India will establish a new national facility dedicated to reprocessing safeguarded nuclear material under IAEA safeguards.
* Nuclear material and equipment transferred to India by the US.
Jul
18
Nuclear Energy: The Need For A New Framework: by IAEA Director General Dr. Mohamed ElBaradei
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I am delighted to join Vice-Chancellor and Foreign Minister Steinmeier and other distinguished participants at this international conference. I am grateful to the governments of Germany, the Netherlands and the United Kingdom for organising this timely event to address the critical issue of assurance of supply of nuclear fuel.
Since the dawn of the nuclear age more than sixty years ago, the international community has been struggling to cage the military atom while encouraging the use of the peaceful atom - in other words, to contain the threat and maximise the opportunity. The first moves to develop a scheme to control atomic energy came very soon after the end of World War Two. In November 1945 - a few months after Hiroshima and Nagasaki demonstrated the horrific destructive power of the atomic bomb - the US President and the Prime Ministers of Britain and Canada proposed that the entire field of atomic energy should be put under international control. Nations would share scientific information for peaceful ends and atomic weapons would be eliminated. Seven months later, in June 1946, the United States put the so-called Baruch Plan before the newly created United Nations Atomic Energy Commission. The Plan proposed entrusting “all phases of the development and use of nuclear energy” to a new international authority. The manufacture of nuclear bombs would cease and existing bombs would be disposed of.
Unfinished Business
This, however, was not to be. There was no agreement on the Baruch Plan. By 1948, the Soviet Union had its own nuclear weapons and the nuclear arms race was underway. Instead of trust and cooperation, we got Mutual Assured Destruction and the balance of terror. I mention this, however, as a reminder that, when we talk about better control over the nuclear fuel cycle and nuclear disarmament, we are simply returning to unfinished business and unfulfilled visions, not embarking on something new. The difference is that we now have a chance to learn from the mistakes of the past and an opportunity not to repeat them.
Although the vision of nuclear technology shared peacefully by all failed to become reality in the 1940s and 1950s, the world powers did agree on less ambitious forms of international cooperation in the nuclear field. In due course, this became the non-proliferation regime as we know it today, with the IAEA and the nuclear Non-Proliferation Treaty at its centre. Last year we celebrated the 50th anniversary of the establishment of the IAEA. This summer marks the 40th anniversary of the signing of the NPT. The regime they embody has broadly, but imperfectly, managed to curb proliferation and enabled developing countries, through the IAEA, to benefit from nuclear science and technology. But, regrettably, it has not so far been very successful in achieving nuclear disarmament.
A growing number of countries are looking seriously at introducing or expanding the use of nuclear power as part of their energy mix. The use of nuclear power for electricity production seems certain to rise significantly in the next few decades. This is primarily because of the huge need for additional energy as the world´s reserves of fossil fuels are inexorably depleted and concerns about global warming mount. Some leading Green thinkers have concluded that nuclear energy is the only viable way ahead - although, since some of them also believe that most of humanity will soon be wiped out by global warming, I am not sure how many of us will be left to appreciate its benefits.
Energy is the engine of development. At the expanded G8 Summit in St. Petersburg in 2006, I emphasized the importance of “global energy security,” which means fulfilling the energy needs of all countries and peoples. These include the 1.6 billion people who have no access to electricity, and the 2.4 billion who continue to rely on traditional biomass fuels. Today´s gross inequalities in access to energy are staggering: In some African countries, per capita electricity consumption is around 50 kilowatt-hours per year. That translates to an average availability of 6 watts - less than a normal light bulb - for each person. By contrast, the developed countries that make up the Organisation for Economic Cooperation and Development (OECD), on average, consume electricity at a rate per capita of 8 600 kilowatt-hours per year - roughly 170 times higher.
To date, the use of nuclear power has been concentrated mainly in industrialised countries. But of the 35 new reactors currently under construction, 17 are in developing countries. Recent expansion has been primarily in Asia and Eastern Europe. It is vital that the expected increase in the use of nuclear power is managed properly, taking into account all economic, safety, security and non-proliferation requirements.
If expectations of a surge in nuclear power materialise, the question arises - how will the nuclear fuel cycle in general be managed and, specifically, where will the nuclear fuel come from? Will it remain in the hands of the few existing suppliers? Or will additional States develop their own national enrichment and reprocessing capabilities? I believe it is possible - and indeed essential - to create a new mechanism that will assure supplies of nuclear fuel and reactors to countries which want them, while strengthening non-proliferation through better controls over the sensitive parts of the nuclear fuel cycle - uranium enrichment and plutonium separation - by way of a multinational approach to the front and back ends of the cycle.
Different Starting Point
The non-proliferation regime is, in many ways, at a crucial juncture. Our starting point, as we consider how to strengthen it, is clearly very different from 60 years ago. Instead of one State with nuclear weapons - with allies and rivals hot on its heels - we have nine that we know about. Despite welcome cutbacks in nuclear arsenals, there are still some 27 000 nuclear warheads in the world today. All aspects of nuclear technology are “out of the tube.” Nuclear threats have become more dangerous and more complex. Virtually all States with nuclear weapons are extending or modernizing their nuclear weapon arsenals. Other States have tried to develop clandestine nuclear programmes. Terrorist groups have made clear their interest in acquiring nuclear explosive devices.
There have, of course, also been some positive developments. We now have a well functioning IAEA safeguards system to verify that nuclear activities are peaceful, and more than 100 countries in many regions of the world have got together to establish nuclear weapon-free zones.
It is, naturally, for States to decide how to respond to the challenges posed by the growth in the use of nuclear energy, especially questions associated with the fuel cycle. So far, 12 proposals have been made on different ways of assuring supply of nuclear fuel since I first suggested in 2003 that we urgently needed to revisit this important issue. The 12 proposals cover a broad spectrum, from establishing an IAEA-controlled last resort reserve of low enriched uranium to providing backup assurance of supply and setting up international uranium enrichment centres.
In developing such a mechanism, I can envisage a three-stage process. The first step would be to establish a system for assuring supply of fuel for nuclear power reactors - and, if necessary, supply of the actual reactors. The second step would be to have all new enrichment and reprocessing activities in future put exclusively under multilateral control. And the third step would be to convert all existing enrichment and reprocessing facilities from national to multilateral operations. For this to happen, a prerequisite will be to conclude a global, verifiable treaty on the prohibition of fissile material production for nuclear weapons, the FMCT, as it is called.
This is, clearly, a tall order. However, if we fail to achieve such a solution, the alternative will be the mastery of sensitive parts of the fuel cycle by more and more countries, not only for economic reasons but, equally, for deterrence purposes. This will lead to the emergence of more and more nuclear-weapon capable States, in addition to the States which already have nuclear arsenals. This, in my view, would be a dangerous setback. Rather than moving towards a nuclear-weapon-free world, we would find ourselves living under a security system that is more dependent on nuclear weapons, and therefore more precarious and unpredictable, than the one we have today, or indeed the one we had during the Cold War.
Elements of a Supply Mechanism
What are the key requirements if an assurance of supply mechanism is to work?
First, I believe, it must be unambiguously under some form of multinational control, not just managed by the leading nuclear powers or a few suppliers. Consumers and suppliers should be equal participants. Otherwise, the mechanism would fail to win the confidence of countries considering a nuclear energy programme.
Second, an assurance of supply mechanism would be available to all States, based on equal rights and obligations for all participants. Equality is key to the success of the mechanism.
Third, the release of nuclear material to a consumer State should be determined by non-political criteria established in advance and applied in an objective and consistent manner.
Fourth, assurance of fuel supply must be part of an over-arching multilateral nuclear framework. The global political environment will be critical in determining whether such a venture will succeed or fail. In particular, there is a symbiotic relationship between nuclear non-proliferation and nuclear disarmament. Neither will function without the other. The United States and Russia have a special responsibility. As holders of the largest stockpiles of nuclear weapons, their actions help to shape the actions of others. Their continued reliance - and that of the other weapon States - on nuclear weapons as the cornerstone of their security sends the wrong message. At the NPT Review Conference in 2000, the nuclear-weapon States gave an unequivocal undertaking “to accomplish the total elimination of their nuclear arsenals.” They must not lose sight of that goal.
In the long term, a new nuclear framework would be helped by truly innovative reactor and fuel cycle technology which is safer than what we have at present and proliferation-resistant - in other words, designed in a way that makes it more difficult or impossible to mis-use for weapon purposes. It would also require the application of a robust IAEA safeguards system, in which a comprehensive safeguards agreement and an additional protocol are the universal standard. And we will need equally stringent international nuclear safety and security regimes.
The three big challenges we face, therefore, are to strengthen nuclear non-proliferation, accelerate the nuclear disarmament process and ensure that the benefits of nuclear energy - for power generation and other applications including in health, water and food - are made available to developing countries to help them lift their people out of poverty. The IAEA can help States to meet all three of these challenges.
To focus on the subject of this conference, our Statute already gives us the authority to provide fuel cycle related services to Member States. Many of the existing proposals on assurance of fuel supply envisage a key role for the Agency. For example, the Nuclear Threat Initiative (NTI) offered $50 million in 2006 to create a stockpile of low enriched uranium to be managed by the IAEA, provided matching contributions of $100 million could be found. Last December, the U.S. Congress authorized a matching $50 million contribution. Norway has pledged $5 million. Once the remaining $45 million needed to move this project forward is secured, I will put this project before the IAEA´s Board of Governors for their consideration.
The Russian Federation has already begun work to set up an international uranium enrichment facility housing a low enriched uranium reserve which the Agency can draw upon. We are continuing our dialogue and discussions with the Russian Federation to see when the proposal can be presented to the Board of Governors. Germany has proposed setting up an entirely new multilateral enrichment plant on an “extraterritorial” basis, with the IAEA exercising control over exports of low enriched uranium from the plant and also offering a supply assurance.
Conclusion
Let me reiterate my conviction that a multilateral approach to the nuclear fuel cycle has great potential to ensure safe and secure use of nuclear energy for peaceful purposes, while minimizing the risk of proliferation.
German President Horst Koehler recently highlighted the importance of trust and cooperation in international relations and said: “The best way to build trust is disarmament, arms control and non-proliferation.” He also noted that trust has a key ingredient: “Whatever we demand of others, we must also demand of ourselves,” he said. “Nowadays, there is no way double standards can be concealed.”
I believe we will not succeed in creating a world in which the benefits of peaceful nuclear energy are available to all countries which want it, while preventing the spread of nuclear weapons, unless trust is established at every stage and at all levels: trust that access to nuclear technology will be guaranteed and not interrupted for political reasons; trust that no new countries will seek to develop nuclear weapons; and trust that the nuclear weapon States will learn to live without the protection which they believe their nuclear weapons provide.
Jul
18
IAEA as an Organisation
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The International Atomic Energy Agency (IAEA) is an international organization that seeks to promote the peaceful use of nuclear energy and to inhibit its use for military purposes. Though established independently of the United Nations under its own international treaty (the IAEA Statute), the IAEA reports to both the General Assembly and the Security Council.
The IAEA has its headquarters in Vienna, Austria. Two “Regional Safeguards Offices” are located in Toronto, Canada; and Tokyo, Japan. The IAEA has two liaison offices, located in New York, USA; and Geneva, Switzerland. In addition, it has laboratories in Seibersdorf and Vienna, Austria; Monaco; and Trieste, Italy.
It was established as an autonomous organization on July 29, 1957. In 1953, U.S. President Dwight D. Eisenhower envisioned the creation of this international body to control and develop the use of atomic energy, in his “Atoms for Peace” speech before the UN General Assembly. The organization and its Director General, Mohamed ElBaradei, were jointly awarded the Nobel Peace Prize announced on 7 October 2005.
Jul
17
Developing World Has Big Inflation Problem
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The U.S. and Europe have caught the inflation blues, but emerging economies have a full-blown case of inflation fever.
Global inflation is set to rise from 3.5% to 5.8% this year, the highest in nine years, says Merrill Lynch. Nearly two-thirds of the increase will come from emerging markets.
Bourses have been hit hard in developing countries with soaring inflation. Their central banks and policymakers have been slow to hike interest rates or let currencies strengthen.
As more emerging market countries finally step up to the inflation battle, their growth outlooks for next year will weaken.
“In most emerging markets, monetary policy and credit growth are far too stimulative. They need to throttle back,” said Nariman Behravesh, chief economist at Global Insight.
Developing nations don’t want to slow growth — especially with exports to the U.S. weakening.
“The longer they put it off, the worse the problem becomes and the harsher the medicine is going to be to get inflation under control,” Behravesh said.
A Morgan Stanley report says 50 countries, including India and Russia, are being torched by double-digit inflation rates.
China is key. Its inflation rate hit a 12-year high of 8.7% early this year but cooled to 7.7% in May. It likely continued to ease in June, analysts said.
“A moderation in Chinese inflation is in the cards,” Goldman Sachs said in a report Monday.
“By year-end 2008, China’s No. 1 economic worry will be slower growth and a squeezed export sector, rather than inflation,” said Donald Straszheim of Roth Capital Partners.
Policymakers in many developing countries blame the spike in oil and food prices for much of their inflation woes.
Rather than tighten monetary policy, they’ve blunted the impact of inflation with price controls and subsidies. Those moves keep demand artificially high, lifting global prices.
China, India and Malaysia have recently raised state-set energy prices.
Slowing the economic growth of developing countries is key to curbing inflation, says Edwin Truman, senior fellow at the Peterson Institute for International Economics.
“Inflation has become a global problem, and industrial countries alone can’t solve it,” he said.
Emerging economies that delay fighting inflation “risk a real hard landing,” he added, “because they’ll slam on the brakes.”
The European Central Bank has kept rates high to battle inflation, tightening by a quarter-point 15 4.25% just last week. The Federal Reserve, which has cut rates to thwart a housing slump and credit crunch, has signaled it may tighten by year-end, though many analysts doubt that.
The falling dollar has put some developing countries in a bind, some economists say.
Strong Currencies Urged
Many emerging economies, including Asia’s export-driven countries, peg their currencies to the dollar.
Those countries have balked at letting their currencies strengthen, because that would raise the price of their exports.
Fed Vice Chairman Donald Kohn, in a recent speech in Germany, urged emerging economies to drop their dollar pegs . Kohn said de-pegging would give them a freer hand to tighten monetary policy. Kohn and European colleagues urged emerging markets to do more, if not take the lead, in fighting inflation.
George Hoguet, an investment strategist at State Street Global Advisors, says Asia’s exporters, especially China, need to take tougher anti-inflation measures.
“One key to limiting inflation is appreciating Asian exchange rates,” he said. “What I think is likely to happen is that China will revalue the renminbi. When China moves, it will pave the way and bring along some of the exchange rates from other Asian countries.”
He expects China to wait to revalue the renminbi, or yuan, until after the Olympics of Aug. 8-24.
“The RMB’s pace against the dollar has accelerated, but on a trade-weighted basis it hasn’t moved that much,” Hoguet said.
Global Insight’s Behravesh agrees that Asian nations may follow China’s forex lead. But he says they will likely hike rates on their own.
More central banks seem to be getting the message. India, Mexico and Chile recently surprised with rate hikes.
Central Banks Move, Slowly
While some central banks have grudgingly upped rates, they’re still not doing enough, say economists. That’s because rate hikes haven’t kept up with spiraling inflation, so real rates continue to fall in many emerging markets.
Russia’s inflation has jumped to 15%. Official rates are less than half that.
Russia’s central bank did let the ruble rise on July 9 for the second time in a month to try to curb inflation.
In Brazil and Mexico, rates have been held “comfortably above” inflation rates, said a Goldman report. “Inflation in Brazil appears to be well-contained relative to other emerging markets.”
Some observers say too much is being made of the inflation-fighting policies of emerging economies.
“Ultimately it all comes back to one thing, which is oil,” said Michael Hartnett, a global equity strategist at Merrill Lynch. “Oil is very much setting global inflation expectations. Until oil comes off in a meaningful way, people are going to expect interest rates to go up to cope with inflation.”
Countries behind the curve in battling inflation are “being eschewed by institutional investors,” said a report by State Street, which tracks fund flow. Among the countries: Vietnam, Thailand, Indonesia and the Philippines.
Hartnett says bourses in countries whose central banks lack credibility in the inflation fight have been among the worst performers amid this year’s global market sell-off.
“The market is doing a lot of differentiating between emerging markets, rather than lump them all together,” he said.
India’s stock market has plunged 40%. Its inflation rate tops 11%.
Hartnett says the falling value of currencies in South Africa, South Korea and Turkey show that those countries are viewed as laggards in the inflation fight.
South Korea, which usually has fought to keep the won from rising, has been trying to prop up its currency in recent months, Truman says, because of inflation worries.
Jul
17
Slowing exports curb China growth
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Chinese economic growth slowed in the second quarter of 2008, constrained by slowing demand for exports, rising prices and the high cost of credit.
The National Bureau of Statistics said the economy grew at an annual rate of 10.1% in the three months to June, down from 10.6% over the previous quarter.
If it keeps growing at a double-digit pace, then China may overtake Germany as the world’s third-largest economy.
Beijing has been trying to curb rising food costs amid fears of social unrest.
Consumer price inflation also cooled to an annual rate of 7.1% in June - a decline from 7.7% in May.
But with producer prices rising to an annual rate of 8.8% in June - the fastest pace of growth since the mid-1990s - the expectation is that the government will go further to make sure that these costs are not passed on to consumers.
“While inflation has been easing, it is still at a fairly high level,” said Li Xiaochao, the statistics bureau’s spokesman.
“If prices stay high for a long period, it’s not good for the stable development of the economy and will affect people’s lives, especially those with low incomes.
“So we have to continue with price controls to control inflation,” he added.
Analysts considered that the growth figures were in line with expectations and despite signs that the economy has peaked, double-digit growth is still expected for the full year.
Jul
17
RBI may further squeeze money supply to control inflation
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The Reserve Bank may go in for further tightening of money supply as there is no likelihood of inflation coming to single digit in the next six months, according to indications given by the Central Bank Governor to a parliamentary panel.
Some more monetary measures may be taken to contain the aggregate demand to counter inflation, RBI Governor Y V Reddy told members of the Parliamentary Standing Committee attached to the Finance Ministry earlier this week, sources said.
Sources said Reddy admitted that there will be no easing of inflation in the next six months. Rather it will now go over 12 per cent, the Governor is understood to have said.
When some members asked why is inflation inching towards 12 per cent mark, while in countries like Britain it is below four per cent, Reddy replied that different countries have different yardsticks for measuring inflation.
According to sources, the Governor did not give any answer to a question by members that why are prices of vegetables rising when the Government says inflation is imported.
Last month, the central bank has raised short-term lending rates for banks– repo– by 0.75 per cent in two installments, while also increasing mandatory cash deposits of banks by 0.50 per cent in two phases to suck out excess liquidity.
RBI is now slated to announce quarterly review of credit policy on July 29, when it may announce further measures to absorb money supply.
Inflation has been scaling new 13-year highs after the government’s move to raise prices of petrol, diesel and LPG was reflected in the data. For the week ended June 28, inflation rose to 11.89 per cent.
Jul
17
World oil prices rebounded in Asian trade on Thursday after sharp falls on a bigger-than-expected rise in US crude reserves, analysts said.
New York’s main futures contract, light sweet crude for August delivery, had dropped more than USD 10.50 over two days.
On Thursday the benchmark contract rose 23 cents to USD 134.83 a barrel after closing at USD 134.60 a day before, off USD 4.14, at the end of US trading hours.
That fall followed a dive of USD 6.44 on Tuesday, its sharpest daily decline since January 1991. Brent North Sea crude for September delivery gained 49 cents to USD 136.30.
The Brent August contract expired on Wednesday, down USD 2.56 at USD 136.19 in London. The US Energy Information Administration said on Wednesday that crude inventories rose by 3.0 million barrels to 296.9 million barrels in the week ending July 11, confounding market expectations for a decline of 2.2 million barrels.
Oil prices had soared after breaking through USD 100 at the start of 2008, and hit peaks above USD 147 dollars last Friday. The record prices sparked protests around the world, and fears for economic growth