NUCLEAR TRADE WITH INDIA: CHINA'S ROLE IN NSG

B.RAMAN

The next three steps in India's quest for civilian nuclear energy would be the approval of the draft of the India-specific safeguardsagreement jointly prepared by officials of the Government of India and the International Atomic Energy Agency (IAEA) by the Board ofGovernors of the IAEA before it is formally signed by India and the IAEA, a consensus in the Nuclear Suppliers' Group (NSG) on the removal ofthe restrictions on nuclear trade with India and the approval of the agreement (known as the 123 agreement) reached by the officials of theUS and India by the US Congress.

2. While the decisions of the IAEA and the NSG would determine the conditions under which the member-countries of the IAEA and the NSGwould trade with India in civilian nuclear matters, the US Congress would decide the conditions under which the US would trade with Indiain the nuclear field.

3.The IAEA is expected to take a decision by the end of August and the NSG in the beginning of September if the US has its way. It has beenreported that Pakistan, which is a member of the Board of Governors of the IAEA, has already submitted a long memorandum to the IAEAraising objections to the proposed safeguards agreement on procedural ground, on grounds of merit and on the ground that it would amountto unfair discrimination to Pakistan.

4. The procedural objection is that the required minimum notice has not been given to the member-countries of the Board of Governors toconsider the agreement carefully and that an attempt is being made to rush through the approval process. The objection on merit relates toalleged dangers of diversion of uranium purchased by India from overseas suppliers for weapons purposes thereby adding to the threat toPakistan. The charge of unfair discrimination to Pakistan is sought to be justified on the ground that there is no simultaneous attempt to liftthe NSG restrictions on nuclear trade with Pakistan. It is learnt that Pakistan has suggested to China that the two should co-ordinate theirpositions at Vienna just as they had co-ordinated their positions on the issue of permanent membership of the UN Security Council for India..

5. Pakistan is not a member of the NSG and would, therefore, have to depend on China for taking up the issue of alleged unfairdiscrimination to Pakistan. Since his recent visit to Japan to attend the G-8 summit, during which he met President Hu Jintao of Chinabilaterally in the margins of the summit, Prime Minister Manmohan Singh and his advisers have been expressing the confidence that theremay not be any difficulty from China. That was before Pakistan circulated its objections .

6.It has been noticed since the Sino-Indian war of 1962 that whenever there was a conflict between Indian and Pakistani interests andbetween Indian and Pakistani concerns on any issue, Beijing favoured the Pakistani interests over the Indian and paid greater attention toPakistani concerns than to Indian concerns.

7. The first departure from this practice was seen during the Kargil conflict of 1999 when Beijing agreed with the US position that Pakistanshould withdraw its troops behind the Line of Control (LOC). It was the Chinese insistence on this during the visit of Nawaz Sharif, the thenPrime Minister, to Beijing at the height of the conflict that made Nawaz fly to Washington DC and request for a face-saving to enablePakistan to withdraw its troops behind the LOC.

8. However, China agreed with Pakistan's position of opposing the permanent membership of the UN Security Council to India. Chineseinterlocutors whom I have had an opportunity of meeting in various seminars denied that Pakistan's opposition had in any way influencedthe Chinese position. According to them, China opposed India's permanent membership because the Government of India tried to ridepiggy-back on Japan.

9. These interlocutors also felt that in the NSG China would strongly underline the need to remove the restrictions on nuclear trade withPakistan without linking it to the lifting of the restrictions on nuclear trade with India. Would it be so? India has to keep its fingers crossed.

10. Annexed is an article written by me on August 12,2007, tracing the evolution of the Chinese position on this issue till then. It is availableat the web site of the South Asia Analysis Group (SAAG), New Delhi, at http://www.southasiaanalysis.org/papers24/paper2330.html (24-7-08)

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and presently, Director, Institute For Topical Studies,Chennai.He is also associated with the Chennai Centre For China studies. E-Mail: seventyone2@gmail.com)

ANNEXURE
Paper no. 2330 12-Aug-2007

CHINA & THE 123 AGREEMENT: An Update
By B. Raman

Between July, 2005, when India and the US agreed in principle on civilian nuclear co-operation, and June, 2006, Beijing's reaction wasunmistakably unenthusiastic. It sought to justify its lack of enthusiasm on the ground that such a special waiver to India, when it has notsigned the Nuclear Non-Proliferation Treaty (NPT) and not given up its military nuclear ambitions, could weaken the global non-proliferationarchitecture.

2. While Chinese Government spokespersons avoided outspoken comments on the India-US deal while making obvious their lack ofenthusiasm for it, the government-controlled media in China observed no such restraint. For example, the "People's Daily" wrote onNovember 4, 2005: "This would be a hard blow on America's leading role in the global proliferation prevention system as well as the systemitself. This will bring about a series of negative impacts. Now that the United States buys another country in with nuclear technologies indefiance of international treaty, other nuclear suppliers also have their own partners of interest as well as good reasons to copy what theUnited States did. A domino effect of nuclear proliferation, once turned into reality, will definitely lead to global nuclear proliferation andcompetition. Always calling itself a 'guard' for nuclear proliferation prevention, the US often condemns other countries for irresponsibletransfers but this time, it hesitates not a bit in revising laws, taking the lead in 'making an exception' (in the case of India).Such an act of theUnited States once again proves that America is not at all a 'guard' of NPT and the treaty, however, is no more than a disguise serving theUS interest. The most immediate reason for the foundation of NSG (Nuclear Suppliers Group) was India's first nuclear test in 1974, afterwhich the United States instantly cut off its nuclear cooperation with India and established the NSG in 1975 to restrict selling sensitivenuclear technologies and raw materials to non-NPT countries. Over the past 30 years, the United States has always been trying to preventIndia from access to nuclear technologies. Today, however, the United States wants a change."

3. The editorial came in the wake of a meeting of the Nuclear Suppliers' Group (NSG) on October 20, 2005, at which a US representativebriefed the NSG members on the Indo-US deal and spoke of the US intention to move for the lifting of the NSG restrictions against India afterthe passage of the enabling legislation by the US Congress and the finalisation of a formal bilateral agreement (the 123 Agreement nowsigned) by India and the US.

4.. The lack of enthusiasm for the Indo-US nuclear deal was again evident at the time of the visit of President George Bush to India in thefirst week of March, 2006. In the daily media briefing of the Chinese Foreign Office at Beijing on March 2, 2006, its spokesperson Qin Gangsaid: "India should abandon nuclear weapons and strengthen atomic safeguards. India should sign the NPT and also dismantle its nuclearweapons. As a signatory country, China hopes non-signatory countries will join it as soon as possible as non-nuclear weapon states,thereby contributing to strengthening the international non-proliferation regime. China hopes that concerned countries developingcooperation in peaceful nuclear uses will pay attention to these efforts. The cooperation should conform with the rules of internationalnon-proliferation mechanisms."

5. This negative attitude was in a great measure caused by the Chinese suspicion that the Indo-US nuclear deal was the US' quid pro quofor an Indian willingness to co-operate with the US in countering the growing Chinese power in the Asian region. This suspicion wasstrengthened when our Prime Minister, Dr. Manmohan Singh, decided not to attend the summit meeting of the Shanghai Co-operationOrganisation (SCO) as an observer at Shanghai in June, 2006. The Indian explanation that since India was only an observer of the SCO andnot a full-fledged member, its participation at the level of the head of Government was not warranted did not seem convincing to Beijing. ThePrime Minister's decision not to go was interpreted as due to the US suspicion that one of the main objectives of the SCO was to counter theUS presence and role in the Central Asian Republics. As a result, China's lack of enthusiasm for the Indo-US nuclear deal continued.

6. In the meanwhile, President Pervez Musharraf of Pakistan initiated a campaign to counter the Indo-US deal at two levels. He did notoppose the deal. Nor did Pakistan energetically try to have the deal disapproved by the US Congress through Congressmen and Senatorssympathetic to it. Instead, it sought to counter the deal by using the following arguments. First, it will be discriminatory to Pakistan if it wasnot made applicable to it too. Second, it will create a military nuclear asymmetry in the sub-continent by enabling India to divert itsdomestic stock of fuel for military purposes, while using the imported fuel for civilian purposes under international safeguards. Thus, it willhave an adverse effect on Pakistan's national security.

7. The US rejected the Pakistani arguments by pointing out that Pakistan's economy was unlikely to grow as rapidly as the Indian economyin the short and medium terms and hence it should be possible to meet its energy requirements from conventional sources. The US alsorepeatedly made it clear that in view of the role of Dr. A. Q. Khan, the so-called father of Pakistan's atomic bomb, and some of his colleaguesin clandestinely supplying nuclear technology to Iran, North Korea and Libya, Pakistan cannot be treated on par with India, which had anunimpeachable record of non-proliferation.

8. While sticking to his arguments, Musharraf requested the Chinese leaders during his State visit to China in February, 2006, for Chineseassistance in the construction of six more nuclear power stations, with a capacity of 600 or 900 MWS each. The Chinese reportedly agreedin principle to supply two stations of 300 MWs each to be followed later by four more. This subject again figured in the General's bilateraldiscussions with Mr.HU in the margins of the SCO summit in June, 2006, and in the subsequent discussions between the officials of the twocountries, who met at Islamabad and Beijing for doing the preparatory work for Chinese President Hu Jintao's visit to Pakistan fromNovember 23 to 26.

9. Gen. Musharraf and his officials were so confident that an agreement in principle for the construction of two new nuclear power stations(Chashma III and IV ) would be initialed during Mr. Hu's visit that they even set up a site selection task force.

10. Then for reasons, which were not clear, there were indications of changes in the Chinese attitude---less negative towards the Indo-USnuclear deal and increasingly guarded on the Pakistani request for new nuclear power stations. In the case of India, the changing Chineseattitude was reflected in the daily media briefing of the Foreign Office spokesperson and in a media interview given by the ChineseAmbassador in New Delhi. In the case of Pakistan, the change was reflected in the daily media briefings of the spokespersons of the twoForeign Offices at Beijing and Islamabad.

11. In an interview to the Press Trust of India (PTI), which was circulated by the agency on November 20, 2006, before the arrival of Mr.Hu inNew Delhi, Mr. Sun Yuxi, the Chinese Ambassador in New Delhi, was reported to have stated as follows: ``Every country has the right todevelop energy in any form, including nuclear form, to meet its development needs. The objectives of non-proliferation should also bemaintained and strengthened." When it was pointed out by the agency that India had contended that it abided by all non-proliferation rulesalthough it had not signed the NPT, he said: ``Anything which can strengthen non-proliferation efforts should be welcomed by theinternational community.'' He added that Foreign Secretary Shivshankar Menon had recently apprised him about the issue and told him thatIndia was trying to strengthen the non-proliferation regime. “I (would) like to take his word... If India is making effort, if any effort (is beingmade) to strengthen non-proliferation, I agree,'' he said. The Chinese envoy, however, refused to comment on the Indo-U.S. civil nuclear dealon the ground that it was a bilateral issue between India and the US.

12. A few hours later, in response to a question on the subject, Jiang Yu, spokesperson of the Chinese Foreign Ministry, said at Beijing:"China has sought more information and explanations from India to address the concerns of some countries on the Indo-US civilian nucleardeal. We hope that Indian side can attach importance to these opinions and provide more information and explanations. Chinese side hasnoted that during the deliberations in the NSG regarding US-India nuclear cooperation, some countries expressed concern and doubts. TheChinese side will continue to participate in these relevant discussions with an earnest and responsible attitude."

13. Almost coinciding with these explanations at New Delhi and Beijing, the spokespersons of the Foreign Ministries of Pakistan and Chinatried to discourage expectations in Pakistan that Gen. Musharraf and Mr.Hu would be initialling a memorandum of understanding on theChinese supply of two more nuclear power stations. They described the reports in this regard, which had been appearing in the Pakistanimedia for weeks before Mr. Hu's visit, as speculative and not based on facts.

14. The Joint Declaration issued on November 21, 2006, at the end of the formal talks between Dr. Manmohan Singh and Mr.Hu said:"Energy security constitutes a vital and strategic issue for producing and consuming countries alike. It is consistent with the commoninterest of the two sides to establish an international energy order, which is fair, equitable, secure and stable, and to the benefit of theentire international community. Both sides shall also make joint efforts, bilaterally as well as in multilateral fora, to diversify the globalenergy mix and to increase the share in it of renewable energy sources. Global energy systems should take into account and meet theenergy needs of both countries, as part and parcel of a stable, predictable, secure and clean energy future. In this context, internationalcivilian nuclear cooperation should be advanced through innovative and forward-looking approaches, while safeguarding the effectivenessof international non-proliferation principles. Both countries are committed to non-proliferation objectives and agree to expand their dialogueon the related issues, in bilateral and international fora."

15. The reference to promotion of international civilian nuclear co-operation through "innovative and forward-looking approaches" wasinterpreted, with some validity, as confirming the evolution of the Chinese view on the Indo-US deal from negative to hopefully positive. As aresult, there was a greater confidence in New Delhi that China might not oppose the removal of restrictions applicable to India when thematter formally came up before the NSG at the initiative of the US. This guarded optimism was also evident from an interview given by ShriPranab Mukherjee, the Indian Minister For External Affairs, to Shri Karan Thapar of the IBN-CNN TV channel on November 26. The relevantextract is annexed.

16. Dr. Manmohan Singh and Mr.Hu had formal talks hardly for a little more than an hour. The carefully-formulated position on the nuclearissue could not have been the outcome of such a brief meeting. The final version of the Joint Declaration was already ready before the twoleaders formally met and approved it. It had been drafted by the officials of the two countries in their preparatory meetings in the weeksbefore Mr. Hu's arrival. The change in the Chinese position must have been the outcome of these discussions in the weeks before Mr. Hu'svisit and not a sudden change on the eve of the summit or at the summit itself.

17. As against this, the change in the Chinese position with regard to Pakistan's request for six more nuclear power stations came aboutsuddenly in the days (not weeks) before Mr. Hu's arrival in Islamabad. Well-informed Pakistani sources attributed the more guarded Chineseposition to the bilateral discussions between President George Bush and Mr.Hu at Hanoi in the margins of the summit of the Asia PacificEconomic Co-operation (APEC) Organisation on November 18 and 19, 2006. The speculation was that during these bilateral discussions, Mr.Bush pointed out to Mr.Hu that the Chinese supply of new nuclear power stations to Pakistan could not be projected as a continuation of theChinese assistance to Pakistan under a 1985 bilateral co-operation treaty under which CHASHMA I and CHASHMA II were given and hencewould need the clearance of the NSG. According to this speculation, Mr. Bush was also reported to have referred to the Pakistani rejectionof repeated requests from the International Atomic Energy Agency (IAEA) to hand over Dr. A. Q. Khan for an independent interrogation andpointed out that the Chinese supply of the new power stations could encourage Pakistan's non-cooperation with the IAEA.

18. It was believed by these sources that Beijing, which has been projecting itself as a responsible and co-operative interlocutor of the US,Japan and South Korea on the question of North Korea's nuclear test and has won praise for its role in bringing North Korea back to thenegotiating table, did not want this positive image to be dented by disregarding the reservations of Mr. Bush relating to the supply of newpower stations to Pakistan. It, therefore, changed its stance at the last minute.

19. There was no substantive reference to the co-operation between China and Pakistan in the field of civilian nuclear energy during Mr.Hu's visit to Pakistan. The joint statement issued on November 25, 2006, by Gen. Musharraf and Mr.Hu said: “The two sides also agreed tostrengthen cooperation in the energy sector, including fossil fuels, coal, hydro-power, nuclear power, renewable sources of energy as wellas in the mining and resources sector.” Addressing a press conference after his talks with Gen. Musharraf, Mr.Hu said in reply to a questionon nuclear co-operation: "Cooperation in the energy sector is an important component in the relationship between the two countries. Wereached a common understanding on strengthening energy cooperation. We would continue this cooperation in future as well." While Mr.Huhimself did not refer to any future supply of new nuclear power stations, some Pakistani analysts interpreted Mr. Hu's remarks as indicatinga willingness to supply more nuclear power stations.

20.Pakistani officials and analysts close to the Government tried to give the impression that the fact that no memorandum of understandingwas signed did not mean that the Chinese were not going ahead with the project. But, the Chinese Foreign Office spokesperson was veryclear on this point during a media briefing on November 20, 2006, at Beijing. He said: "As far as I know, there will be no new arrangement inthis area."

21. Interestingly, in reply to a question on this subject, Mr. Sean McCormack, a spokesperson of the US State Department, said inWashington as follows on November 27,2006: "The US welcomes strong ties between China and Pakistan and urges China to play aconstructive role in world affairs. We encourage development of bilateral relations between Pakistan and its neighbours. China and Pakistanhave a long history of relations. As for any sort of nuclear angle on this, I’m not aware of anything new that was announced or is allowed forby these agreements other than what was already grandfathered in by the Nuclear Suppliers Group. So I don’t think there’s anything new onthat front.”

22.What he apparently meant was that in addition to the Chashma I and Chashma II power stations given by China under an old agreementof 1985 for civilian nuclear co-operation between China and Pakistan, there would be nothing new for the present till approved by the NSG. What was significant was that China paid attention to the US reservations on this subject instead of going ahead with its assistance as itdid in the past in matters such as the supply of M-9 and M-11 missiles and nuclear equipment to Pakistan. This new attention to USreservations is what the Americans welcomed as China's constructive role.

23.There was no reference to China's possible assistance to Pakistan for the construction of Chashma IV and V for nearly seven months---either from the Pakistani side or from the Chinese side. On July 18, 2007, there was a surprising reference to it in a Chinese statement onthe Pakistani commando action in the Lal Masjid. This caused anger against the Chinese, who were suspected to have forced Musharraf toorder the commando action after the kidnapping of six Chinese women by some students of the girls' madrasa attached to the Masjid. The"China Daily" reported as follows on July 18, 2007: "China did not push Pakistan for operations against the Red Mosque, ChineseAmbassador to Pakistan Luo Zhaohui said. It is the consistent policy of China not to meddle in the domestic affairs of other countries, hetold The News, a major Pakistani daily. Luo said he was considering an invitation to visit the mosque but it was made impossible due to theunstable security situation. "We enjoy very cordial relations with the ruling party here and likewise we maintain friendly ties with othersegments of the society including the political parties of the opposition," he said. "I had no knowledge as to why Chinese nationals arebeing targeted and were the victims in five recent incidents", Luo said, referring to several Chinese who were killed in that country. He saidif Chinese continued to be targeted, cooperation between the two countries could suffer. To protect the 3,000 Chinese working in Pakistan,China and Pakistan have decided to set up a Joint Task Force (JTF), the Ambassador revealed. China and Pakistan are still close friendsand neighbors, Luo said. The Chinese Government is in discussions about proposed Chashma-III and IV for nuclear power projects.Chashma-II will be completed early next year, he said."

24.Apparently concerned over the anti-Chinese turn in some sections of public opinion in the tribal areas, the Chinese once again startedtalking of possible Chinese assistance for the construction of Chashma III and IV in order to reassure Pakistani public opinion that Chinawould continue to be a steadfast friend of Pakistan. China's reversion to its pre-November,2006, positive stand on Chashma III and IV alsocame in the wake of reported Chinese concerns over the real purpose of the reported concert of democracies involving India, the US, Japanand Australia and moves for a joint naval exercise involving these four countries plus Singapore.

25.On August 2,2007,Pakistan's National Command Authority met under the chairmanship of President General Pervez Musharraf, todiscuss, inter alia, India's 123 agreement with the US. A statement issued at the end of the meeting said:“The US-India nuclear agreementwould have implications on strategic stability of the region as it would enable India to produce significant quantities of fissile material andnuclear weapons from un-safeguarded nuclear reactors.The objective of strategic stability in South Asia and the global non-proliferationregime would have been better served if the US had considered a package approach for Pakistan and India with a view to preventing anuclear arms race in the region and promoting nuclear restraints.While continuing to act with responsibility in maintaining credible minimumdeterrence and avoiding an arms race, Pakistan will neither be oblivious to its security requirements, nor to the needs of its economicdevelopment which demand growth in the energy sector.The meeting reviewed Pakistan’s objective and plans for civil nuclear powergeneration under IAEA safeguards, which is part of the overall energy strategy to meet the requirements of economic growth in the country.This objective will be pursued on priority basis especially in view of the increasing oil prices."

26. A Press Trust of India despatch from Beijing after the conclusion of the 123 agreement has cited a Chinese spokesperson as indicatingthat China would adopt a "creative" approach to the development. This recalls the use of the expression "innovative" at the time of Hu'svisit to India.

27. When the issue of the NSG relaxing or lifting its present restrictions on India comes up before it formally in the wake of the 123agreement, three Scenarios are possible:
SCENARIO I: China does not agree to it. This Scenario is unlikely as this could affect the forward momentum in Indo-Chinese relations.

SCENARIO II: China agrees to it without any conditions in the interest of its good relations with India without worrying about its impact on itsrelations with Pakistan. It seems to be an over-optimistic scenario for the present.

SCENARIO III: China agrees to it subject to the condition that there is a similar relaxation of the NSG guidelines in the case of Pakistan sothat it could sell Chashmas III and IV to Pakistan.This Scenario was posed to Shri Pranab Mukherjee by Shri Karan Thapar. His answerswere evasive, but one got the impression that India would not be unduly concerned over this so long as the restrictions on its internationalpurchases are lifted.

28. In the eventuality of Scenario III materialising, there could be a delay in the implementation of the 123 agreement due to the followingreasons:
The US might insist that before clearing the supply of Chashma III and IV to Pakistan, China and Pakistan should sign a formal agreement similar to the Indo-US deal under which Pakistan would separate its military and civilian infrastructure and sign a Pakistan-centric safeguards agreement with the IAEA, which would apply to its civilian infrastructure.

There could be Congressional opposition to the US agreeing to this till the Pakistan Government makes A.Q.Khan available for interrogation by IAEA experts.

ANNEXURE
EXTRACTS FROM SHRI PRANAB MUKHERJEE'S INTERVIEW TO SHRI KARAN THAPAR
Karan Thapar: Hello and welcome to Devil’s Advocate. As attention starts to focus on India’s relationship with China and United States,those are the two key issues I shall raise today in an exclusive interview with External Affairs Minister Pranab Mukherjee.
Mr Mukherjee, let’s start with the Chinese President’s visit to India, which has just been concluded. The joint declaration says, “Internationalcivilian nuclear cooperation should be advanced through innovative and forward-looking approaches while safeguarding the effectivenessof international non-proliferation principles.” Do you interpret that as an endorsement of the Indo-US nuclear deal?
Pranab Mukherjee: No. After all we are also for non-proliferation. At the same time, what is being done with India, especially with regard tothe Indo-US nuclear deal, they are giving a special treatment to India because of India’s track record related to non-proliferation.
Karan Thapar: So, you’re saying that China has not endorsed it?
Pranab Mukherjee: No. China has endorsed it. I am just explaining the ‘innovative’ word.
Karan Thapar: So, when officials of your ministry have given an assessment to The Hindu, as they did on Friday, to say that China will notcome in the way of any decisions of the Nuclear Suppliers Group to lift restrictions on international civilian nuclear cooperation with India,”you agree with that agreement?
Pranab Mukherjee: I hope so.
Karan Thapar: When you say hope so, is there some doubt? Is there some uncertainty?
Pranab Mukherjee: No. There is no uncertainty. I hope that they will not come in the way.
Karan Thapar: So you’re confident that China will not come in the way?
Pranab Mukherjee: Why are you playing with words? In diplomacy, we don't play with words. What we say is we wait till the official outcomecomes.
Karan Thapar: But you are confident?
Pranab Mukherjee: I am confident.
Karan Thapar: There is a lot of speculation that China might end up offering a similar nuclear deal to Pakistan. So far in the newspapers,there is no mention of it. But if it were to have been offered quietly and not made public, would you be concerned?
Pranab Mukherjee: We shall have to recognise the fact that different countries have different relationships with different countries, keepingin view their own perspectives. Relationship of one country need not stand in the relationship of the other country. Therefore, we shall haveto keep that fact always in view while assessing the relationship between two countries.
Karan Thapar: Very interesting. Most people will interpret that to mean that if China does give Pakistan a nuclear deal similar to the Indo-USnuclear deal, India will have no objection?
Pranab Mukherjee: It's not a question of my objection or non-objection. It's a question of what happens in the ground reality. Therefore, weshall have to keep in view… For instance, Pakistan is being supplied with sophisticated weapons by the USA over a long period.