Why Russia scores in India’s nuclear market

The Kudankulam nuclear power plant.

The Kudankulam nuclear power plant.

While the American companies continue to harbour anxieties about India’s nuclear liability regime, Russia has no such issues, giving Moscow a distinctive edge over other competitors in the world’s fastest growing civil nuclear market.

The news of the discovery of what is being hailed as the world’s largest uranium deposit in India has prompted conflicting comments from experts. The deposits in Andhra Pradesh are estimated to contain 49,000 tonnes of uranium. Indian scientists, however, believe that the quantity of uranium at Tummalapalle may triple to 150,000 tonnes, which will make it world's largest uranium producing mine.

The new discovery is set to reduce India’s dependence on foreign suppliers of the yellow metal. Interestingly, the disclosure of the mammoth uranium deposits coincided with US Secretary of State Hillary Clinton’s visit to India in July during which issues relating to the India-US civil nuclear deal figured prominently in discussions between the two sides.

In 2008 the George Bush Administration signed a deal that allowed the sale of reactors and nuclear fuel to India despite New Delhi having nuclear weapons and not having signed the Nuclear Non-Proliferation Treaty (NPT). The American advocates of the agreement countered the arguments of the powerful anti-nuclear lobby by pointing out that the deal would bring billions of dollars to American business and create thousands of jobs. However, the deal has become increasingly complicated due to a host of factors.

American firms have still not sold India any reactors or equipment. First, the catastrophe in Japan has cooled the enthusiasm of many in India about nuclear energy. Second, the Indian parliament passed a law that makes the supplier liable for any accidents that may occur throughout the reactor’s service life.

The onerous liability has dramatically increased risks for the producers of nuclear power plant equipment, risks that American private firms and their insurers may find unacceptable. “The winners will be the Russian and French state-owned corporations. These corporations have much deeper pockets than the American ones,” says Richard Fontaine of the Centre of a New American Security in Washington.

The situation became still more complicated in June when the 46-nation Nuclear Suppliers Group (NSG), that also includes Russia, banned the export of sensitive uranium enrichment and reprocessing technologies (ENR) to countries that have not signed the NPT. The Indian government and the foreign policy-strategic establishment strongly protested these new NSG guidelines that they saw as a betrayal of the clean waiver granted by the nuclear cartel to India in September 2008.

How will Russia react to these restrictions considering that it has had close ties with India in peaceful nuclear energy since the Soviet times? Alexander Kadakin, Russia’s ambassador to India, said in an interview that no nuclear apartheid could be applied to India. “Russia’s position is very clear and it has not changed: We want India to become a fully-fledged member of the NSG and similar regimes,” he said.

One should, however, keep in mind that the non-proliferation regime should be the same for all member countries. Rosatom repeatedly pledged its adherence to it. If Russia makes concessions to any market participant, it would damage Russian business in other countries, including the United States.

So far India’s non-proliferation record has been impeccable. As for the new NSG rules, according to Kadakin, they will not affect the ambitious plans of nuclear energy development in India with Russian assistance. The first unit of the Kudankulam nuclear plant built with Russian assistance is to go into operation late this year. Six months later it will be the turn of the second unit.

“Russia has an indisputable advantage because we are launching two third-generation reactors this year after having passed all the procedures of approval, construction, public hearings and so on. The Europeans and the Americans have yet to do that. Most importantly, the Indians do not know what problems may arise with the Americans and the Europeans. I think it would be safe to say that we can claim at least one-fourth of the construction market,” says Sergey Kondratyev, senior expert with the Energy and Finance Institute.

In the long term, though, the construction of nuclear plants may face difficulties. Stress tests will be required in earthquake-prone areas. Besides, the price of additional risk safeguards will be included in the future projects raising the price of one kilowatt of energy for Indian consumers. Indian officials say the rise in electricity tariffs will not be critical. Demand for power from the country’s booming economy is steadily growing, while the authorities are fairly sceptical about switching to hydrocarbons. They believe peaceful nuclear energy is just the right decision.

India is arguably the leader among the countries developing their nuclear energy. Foreign investors are anxious to break into its market. The country is planning to build more than 30 reactors in the near future, mostly of foreign design. While India is facing some problems in implementing its nuclear deal with the US, there are no such issues with Russia. That makes Moscow the favourite in the Indian energy market.

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