Three important policy elements of the India-US Nuclear and 123 agreements

As India debates and will vote for the India-US Nuclear agreement through its members of parliament (it is a proxy vote in that the members of parliament will be voting whether the parliament trusts the current government or not), and as individual members of parliament are being tugged in different directions including their own conscience, there are three policy questions they should consider.

Based on their assessment on these three policy elements, the members of parliament should cast their votes.

(1) Will the safeguards agreement between India and the International Atomic Energy Agency (IAEA), and the exemption obtained from the Nuclear Suppliers' Group assure India uninterrupted supply of nuclear fuel and technology in perpetuity if India abides by the IAEA agreement even if the United States exercises the Hyde Amendment prerogative? (The Hyde Act in the India-US Nuclear agreement prohibits the U.S. administration from directly or indirectly assisting India with lifetime fuel supplies after suspension of the deal).

Simply put, is there separability between the agreement with IAEA and the Nuclear Suppliers' Group (bilateral 123 agreement), and the India-US Nuclear agreement?

The Indian government including Prime Minister ManMohan Singh and Congress party president Mrs. Sonia Gandhi appears to think that the answer to this question is "Yes". Several others -- policy leaders and scientists including P. K. Iyengar (former chairman, Atomic Energy Commission), A. Gopalakrishnan (former Atomic Energy Regulatory Board chief) and A.N. Prasad (former Bhabha Atomic Research Centre Director) assert that the answer is "No". (The three scientists, "Therefore, the government owes a clarification to the Parliament and the public about how they intend to avoid the consequential huge economic loss from the non-operation of these extremely costly imported reactors, as a result of fuel denial.”)

(2) Will the Nuclear agreement with the IAEA and the Nuclear Suppliers' Group (NSG), and/or the agreement with the United States weaken, in any manner, India’s nuclear deterrent and an ability to protect & promote indigenous R&D efforts in nuclear technology?

Simply put, will India's national security and/or sovereignty be compromised? The government says, "No". Others assert that the agreements would compromise the security interests at least some.

(3) Will the Nuclear agreement with the IAEA and the Nuclear Suppliers' Group (NSG), and/or the agreement with the United States have negative collateral effects on other areas of national interest such agriculture, defense and space?

Simply put, will India's national interests be protected? The government says, "Yes". Other including Placid Rodriguez assert that India's national interests may be compromised. (Rodgriguez, "My greatest reservation (about the deal) is that the strategic alliance between India and the US is going into agriculture because in the other three sectors (defence, space and nuclear) we are strong and we can go independently and we will go.)

Indian policy leaders and citizens have to carefully consider the geopolitics in assessing the India-US Nuclear agreement

As India debates the merits of the India-US Nuclear agreement (123 agreement), public policy leaders and citizens one must consider three the current and potential geopolitics in determining the acceptability of the India-US Nuclear agreement. There are at least three different elements to be considered --

(1) The Larry Pressler Amendment which was in effect in the U.S. with regard to the export/sale of military technology to Pakistan mandated that the President of the United States had to certify to the U.S. Congress that Pakistan was not misusing the military technology. In 1990 the unthinkable happened. Pakistan had paid billion of dollars for the purchase of more than F-16 fighter aircrafts. But the then President George H.W. Bush refused to provide the certification, and Pakistan was denied the F-16 fighter aircrafts though it had paid for them. Pakistan had got those aircrafts in 2005-2006 when President Bush decided to grant India exemption from the sale of nuclear technology and fuel.

(2) We should remember that first nuclear power station -- Tarapur Atomic Power Station -- built in India ran into serious difficulties in the 1960s. The nuclear power station was built with the help of the US and Europe, and with the assurance of continuous nuclear fuel supply. However, because of many domestic and global pressures including the pressure of the Non-proliferation advocates, the United States and France pulled out of the agreement abruptly. India was stranded but thanks to the leadership of the Indian scientists and the political leadership including Mrs. Indira Gandhi, India developed the nuclear and space technology indigenously.

Congratulations to India that in spite of the attempts to impute a variety of motives to India, India never pulled the Tarapur Atomic Power Station out of the IAEA safeguards.

(3) Assuming that the Nuclear agreement is consummated, what will India do if any party -- be it India or the U.S. (because of Hyde Amendment) -- reneges from the agreement in the future? Where will India go for the nuclear fuel and technology? Imagine the scenario twenty-years from now. Assume India has 30 nuclear power plants in different parts of the country and abruptly India loses supply of most of the fuel. That would be disastrous.

The world certainly has changed the 1960s and even from 1990 but it is also likely to change again in 20 years. India should, therefore, consider the geopolitics of the nuclear agreement. dispassionately.

President Bush's decision to attend the Olympic games in China

President Bush has announced that he will attend the opening ceremonies of the Olympic games in Beijing, China next month. Simply put, the President did not want to insult China. Historically and culturally, Chinese citizens are nationalistic and take affront rather easily (and hold these grudges for a long time) to any perceived insult to their country, culture and society.

So what is the point in leaving the Chinese political leadership all upset with the United States? After all, the next President -- whoever it is -- will have to face the consequences of that. President Bush has made the right decision in not complicating the governance for the next President -- after all, President Bush is in the last 6 months of his presidency.

The responsibility and restraint shown by President Bush is to be lauded though it can be argued that China should not be rewarded for its strong arm tactics with Tibetan people and other human rights issues. May be President Bush would have not attended the opening ceremonies if he had at least one full year -- if not more -- to deal with the fall-out of such a decision instead of leaving that to the next President.

After all, President Bush has has been clear in always identifying China as a "competitor." President Bush has also been respectful of Dalai Lama and the Tibetan aspirations. So instinctively President Bush would have wanted to keep away from the Olympic games but he made the right strategic decision.

What is the thinking on Iran-India Gas Pipeline?

For quite sometime now (since 1990), India and Pakistan have been discussing -- on and off -- transporting gas (natural gas) from Iran oilfields to India. The pipeline for such transport from Iran to India will be through Pakistan and even some parts of Afghanistan. That and the enormous estimated cost ($7.5 billion) make the proposition very complicated, if not almost impossible. There are challenging political, economic and diplomatic considerations. Here are just a few --

Assuming that the India-Pakistan political and economic relations are honky-dory, Afghanistan is a mine-field. The political uncertainty and instability in Afghanistan for the last 30 years is evident. So how will the safety of the pipeline be assured? What is the guarantee that the pipeline will not become hostage to political and even religious angst and anger?

Of course, the relations between Pakistan and India is far from reliable. Even as late as in years 1999-2000, India and Pakistan were poised to go to war. Of course, there are constant disagreements over small and big issues -- terrorism, cross-border military incursions, perceptions of slight.

Most difficult of all these challenges is the Kashmir valley. The Kashmir valley issue has no solution at all. Pakistan political leaders are unlikely to ever give up the claim that Kashmir valley should be transferred to Pakistan -- in fact, no Pakistan political leader can afford to do this politically. Of course, India will never let anyone impinge or question its sovereignty -- Kashmir is an integral part of India. If Kashmir valley was not such a narrow and small geographic area, and if there were some natural geographic divides, may be there could have been some give-and-take on the land. But that is not the case.

What if the Iran-Pakistan-India pipeline becomes a reality, and India starts using the enormous amount of natural gas for consumer and industrial purposes, and five years down the road, some political leader in Pakistan or some terrorist in Afghanistan decides to hold the pipeline hostage? India's economy will suffer devastating consequences.

What if Iran decides to raise the price of the natural gas? By supplying such large volumes of natural gas, and with the economic necessity of using the pipeline, Iran will have a near-monopolistic power. Even as the project is on the drawing board, Iran has already demonstrated its unreliability. So what can be of the future?

The pipeline project reached a setback on July 16, 2006 when Iran demanded a price of $7.20 per million British thermal unit ($6.80/GJ) of gas against India's offer of $4.20 per million British thermal unit ($4.00/GJ). The Indian spokesperson then stated that the price demanded by by Iran was more than 50 percent above the prevailing market price in India. India and Pakistan finally agreed in February 2007 to pay Iran $4.93 per million British thermal units ($4.67/GJ) but some details relating to price adjustment remained open to further negotiation.

Finally, the political instability and volatility in Iran is too obvious.

Given all these risks, it is not at all clear why India is investing so much time and effort in exploring this alluring but illusional opportunity.

Added to all these complications are two other elements. First, the United States is stoutly against this project as the U.S. is against any relations with Iran. That political reality may soften but it is not likely to change completely. Both Pakistan and India want the good will of the United States for different reasons -- for security reasons for Pakistan and for aspirational reasons for India. Second, China now wants to be part of this project adding to another level of complexity.

So why this project? It just does not add up.

Background: The project was mooted in 1990 with expectations that it will benefit both India and Pakistan, who do not have sufficient natural gas to meet their rapidly increasing domestic demand for energy. The IPI pipeline is a proposed 2,775-km-long pipeline to deliver natural gas from Iran to Pakistan and India. According to the project proposal, the pipeline will begin from Asalouyeh and stretch over 1,100 km through Iran. In Pakistan, it will pass through Balochistan and Sindh but officials now say the route may be changed if China agrees to the project. The gas will be supplied from the South Pars field. The initial capacity of the pipeline will be 22 billion cubic meter of natural gas per annum, which is expected to be later raised to 55 billion cubic metre. It is expected to cost $7.5 billion.

Barack Obama and the gallop to the Politcal Middle

Barack Obama is racing to the political center, ready to defy stereo-types (e.g. a weak liberal) and spar with John McCain. In this regard, Obama has made several decisions by Obama in the last month or two.

Among those decisions are Obama's solemn undertaking to protect Israel, in a speech to the leading pro-Israeli lobby (AIPAC); Obama's nuanced welcome of U.S. Supreme Court's decisions affirming the right to bear arms by individuals, and the right of appeal to Guantanamo detainees, and gentle disagreement with the Supreme Court's decision rejecting death-penalty for child-rape; Obama's acceptance of the compromise in the Foreign Intelligence Surveillance Act (FISA), which contains a provision granting telecoms companies immunity from lawsuits for co-operating in a surveillance program that conducted wiretaps without warrants;Obama's efforts to lower the rhetoric on free trade and NAFTA, and increased recognition of the importance of trade and markets; and Obama's support and even a call for expansion of faith-based initiatives and programs, and recognition of faith-based community groups.

And now Obama, while sticking to his argument that Iraq war was unjustified and should not have been authorized, affirms that he will listen closely to the advice of the military leaders. While Obama says that the his plan to withdraw the troops in 16 months -- one brigade a month -- is firm, he also suggests that he will "refine" and recalibrate the actual details. Per media reports, Obama said,“What I said this morning what I will repeat, because its consistent with what I have said over the last two years, is that in putting this plan together I will always listen to the advice of commanders on the ground but that ultimately I am the person thats making the strategic decisions.”

Finally, Obama has set a somewhat rigorous condition (surprisingly, so) for later-term abortions. In an interview this week with Relevant, a Christian magazine, Obama said prohibitions on late-term abortions must contain "a strict, well defined exception for the health of the mother." Obama then added: "Now, I don't think that 'mental distress' qualifies as the health of the mother. I think it has to be a serious physical issue that arises in pregnancy, where there are real, significant problems to the mother carrying that child to term."

All these decisions -- and nuanced statements -- move Obama to the political middle, and make it a challenge to categorize and stereo-type him. However, when does that journey to the middle starts to appear a bit opportunistic? Time will tell though so far, I think, that Obama has maintained a sense of authenticity in his journey to the middle. In general, Obama appears to be thoughtful and making sensible changes based on empirics.

The winners and losers in the Indian debate of the India-US Nuclear agreement

The India-US Nuclear agreement (123) debate is furious in India. The coaltion government led by Congress party, and the Prime Minister Manmohan Singh are finally determined to have a go at the nuclear agreement. The communist parties with about 60 parliamentary (Lok Sabha) members are about to withdraw their support to the coalition government but the Samajwadi Party led by Mulayam Singh with about 39 parliament members are all set to support the government.

There is ferocious finger-pointing and heated rhetoric in the Indian debate. Without considering the substance or merit of the agreement, I rate as follows the winners and losers of this debate. I rate on a 1-10 scale, 1 being a perfect loser, 10 being a perfect winner and 5 being no-loss and no-gain.

(1) Congress Party: I give a 5. By pushing aggressively for the consummation of the 123 agreement, the Congress party reinforces its standing as a national party which protects and furthers the country's interests above its own party interests. But the near-collapse of the political alignments for (governance) now and for the forthcoming elections, and the great uncertainty about the final approval of the agreement by the U.S. Congress in good time, and the eventuality that even if the agreement is consummated the United States invokes the Hyde Amendment are too many potential negatives that it make it a 5 for the Congress party.

(2) Mrs. Sonia Gandhi: I give a 5 for the same reasons. The political downsides are too many. But I do laud her ability to put the national interest above the partisan interest.

(3) Prime Minister Manmohan Singh: I give him an 8. Even if the Congress party and its allies were to form the next government after the parliamentary elections, it is most likely that Manmohan Singh will be nominated/elected to be the Prime Minister again. Manmohan Singh is, most likely, concluding his serendipitous political life -- first as much hailed reformist Finance Minister and now as the Prime Minister. Given these facts, how can there be a more lasting and memorable legacy than the consummation of this extra-ordinary nuclear agreement?

(4) The political allies of the Congress party: I give them a 5. What are their choices -- be with the Congress party or with the other political party -- BJP.

(5) Bharatiya Janata Party: I give an 8. The Congress party and its political allies won the 2004 parliamentary elections simply because their collection of parties was larger than that of the Bharatiya Janata Party and its allies. Take, for example, the state of Maharashtra. The coalition Congress party, the National Congress party led by Sharad Pawar and the Communist parties clearly outdid the combine of Bharatiya Janata Party and Shiv Sena. And so went the story in state after state.

But now the opposition to BJP and its political friends is now fragmented -- most states are likely to witness a triangular contest with Congress and its friends as one contestant, the BJP and its friends as the other contestant, and the Communist parties and other small regional groupings as the third contestant. In such a fragmented contest, BJP is likely to benefit very substantially.

Add to this, the opportunity to woo the Muslim voters who are deeply suspicious of the United States -- not unlike the Muslims all over the world after 9/11.

(6) Lal Krishna Advani: I give him a 9. For a man who is 80 years old and who is not seen as a statesman, and who was almost cast away by his own party after his favorable remarks about Jinnah in 2005, there is a remarkable turn-around in fortunes.

The near implausibility of getting the India-US Nuclear agreement approved?

Let us put aside the substance and merit (or lack thereof) of the proposed India-US Nuclear agreement. Let us examine plausibility of getting the India-US Nuclear agreement done now that the Indian government appears to want to get the agreement done -- the United States government has been waiting on the Indian government.

But here is the timetable --

The next step is negotiations and discussions with International Atomic Energy Agency (IAEA), and getting the India-specific elements ratified by the Board of IAEA. This could take 2-3 months.

Subsequently, the agreement has to be discussed and approved by a Nuclear Suppliers' Group (NSG) for the exemption from the ban on supplying nuclear technology to countries that have not signed the Nuclear Non-proliferation Treaty (NPT.) NSG is a group of countries that would eventually supply the nuclear technology (fuel and hardware) to India. And this process could take additional couple of months.

Even if the IAEA and NSG approvals are processed simultaneously, the agreements cannot be completed till September.

So the U.S. Congress cannot consider the agreement -- 123 agreement, IAEA safeguards,and NSG exemption -- till after the November congressional elections which are certain to increase the majority of the Democratic party in the House of Representatives and the Senate, and may be even elect Barack Obama to the Presidency.

Given that the Democrats are strongly concerned about Nuclear Non-Proliferation (NPT), the Nuclear agreement may be received with lots of skepticism in the U.S. Congress. Though the Nuclear agreement would be considered by the lame-duck congress (so the additional electoral Democratic strength will not be reflected), the Democratic leadership can easily derail the consideration of the agreement -- it the leadership so chooses -- by the new congress as Democrats (by virtue of their majority status) control the flow of the bills for consideration.

So the plausibility of getting agreement ratified completely appears dim given this late-hour start.

The New York Times (in a recent editorial) criticizes the India-US Nuclear agreement as too generous and a give away of the the store to India. Of course, this is exactly the opposite of the objections raised by the Communists and the Bharatiya Janata Party in India -- their objections are that the Nuclear agreement potentially impinges upon India's sovereignty and restricts India's future options.

The agreement cannot be placed, if at all, before the U.S. Congress for its consideration and approval before the November elections when the Democratic party is likely to add to its majority in both the Houses of Congress, and may even capture the White House. The Democratic party leaders -- Joe Biden, Barack Obama -- have expressed serious reservations about the agreement.

Given all these facts, and the fact that President Bush's (the champion of the agreement) approval ratings are likely to be hovering in the low 30s, the chances of the agreement being approved by the U.S. Congress is diminishing rapidly.

In the meantime, Lal Krishna Advani is asking for a quick (short) parliamentary session of the Indian parliament houses (Lok Sabha and Rajya Sabha) where the nuclear agreement can be debated and voted either up or down. Congress party and its governing allies are averse to this.

If the Congress party, Mrs. Sonia Gandhi, and Prime Minister Manmohan Singh were willing to sacrifice power for the consummation of the nuclear agreement (and that is quite noble, indeed), how one wishes the party had moved ahead at least 3-4 months back!

Off-shore drilling: The case by and for McCain

McCain has reversed his stance against off-shore drilling, and now advocates it. Obama continues to oppose this. The U.S. Congress currently has a statutory ban on off-shore drilling. What are the pros and cons?

With the high gas prices and improved technologies, voters are open to this idea -- all public polls show that 55-60 percent of Americans support off-shore drilling. It is estimated that there may be about 21 billion barrels of proven oil reserves that are left untouched because of a federal moratorium on offshore exploration and production.

So that should help McCain, right? Not much for two reasons. One, the voters will always be reminded that McCain might be opportunistic and runs counter to McCain's tough-it-out but do the right thing image. Two, the blue-collar, working class, lower income voters who are most affected by high gas prices are also surprisingly principled and tough (they would rather tough it), so McCain may gain no traction with this most plausible demographic group.

The principled-stubbornness of the working class demographic group came to most vivid demonstration when Clinton's advocacy of temporary suspension of gas tax (and Obama's opposition) did not fetch her any favors with this group in the Democratic primaries.

Finally, even if the federal ban on the off-shore drilling was removed it would be a long time before there can be any potential oil production because the individual states such as California and Florida have to make their own determination and then the business of drilling oil has to begin.

Gasoline Tax Holiday and John McCain

John McCain and Hillary Clinton are proposing revocation of gasoline tax for three months -- June, July and August -- for the American consumers. The gasoline tax is about 18 cents per gallon. There are varying estimates of the potential average savings for the consumers -- most estimates (optimistic estimates) appear to put the maximum savings for a family for the entire summer to be about $100.

However, there are several caveats to be stated. First, there may be actually no savings to the families for two reasons -- there may actually be net loss. One reason is that oil companies generally tend to use the repeal of gasoline tax as an excuse to increase the price by an amount that would more than offset gasoline tax. The second reason is that with the repeal of the gasoline tax demand for the gasoline is likely to rise and this demand is not likely to be met by new production essentially leading to a price increase. Second, the repeal of gasoline tax will result in a loss of about $9 billion to the federal highway fund which would result in shortchanging infrastructure development and loss of many jobs -- may be as many as 6,000 in Indiana. Third, this experiment -- revocation of gasoline tax for a short spell -- has been tried (including in Indiana) and the experiment has not only failed to meet the desired goals but also proved counter-productive.

However, all this make political sense for Hillary Clinton -- she is in the fight of her life for the Democratic party presidential nomination, and she wants to get as many votes as possible and differentiate herself from Obama even if it means a bit of theatrical populism.

But the question is this: why is John McCain engaged in this populism? It does not add up. Of course, McCain wants to position himself as a man in touch. However, all this is more likely to muddy up McCain's biggest strength -- an independent, non-populist, somewhat maverick political leader.