The landmark 2008 U.S.-Indian civilian atomic trade deal, intended as the main vehicle for deepening ties between the two nations, has instead served to frustrate the relationship due to differences over how the agreement should be implemented, Reuters reported on Wednesday (see GSN, July 20).

The deal permits U.S. atomic companies to export their products to nuclear-armed India, which in exchange has agreed to open its nonmilitary nuclear facilities to International Atomic Energy Agency inspections. Yet U.S nuclear firms have yet to begin working in the energy-hungry nation due to a strict Indian law that could allow them to be sued should an atomic incident take place.

India's nuclear liability law caps nuclear reactor operator financial culpability following an atomic accident to approximately $320 million and permits tort claims against suppliers of nuclear materials, technology and services -- an actions that conflicts with international norms.

"Two reactor sites have now been set aside for American companies in [the] future," said a high-ranking U.S. official who is traveling with Secretary of State Hillary Clinton during her trip to India this week.

"It would be a very serious problem if India were to come out with regulations that were not in fact in compliance with [the international Convention on Supplementary Compensation for Nuclear Damage] and then left us out in the cold not being able to profit from all of the hard work that we've put into that," the official continued.

"There is concern and disappointment both at the government and industry level. It's more than an irritant,"
ImagIndia Institute think tank chief Robinder Sachdev said.

In order to cement its nuclear deal with New Delhi, Washington first had to obtain a waiver from the 46-nation Nuclear Suppliers Group, which seeks to prevent trade in atomic technology from promoting proliferation. India has used its NSG exemption to also conclude civilian atomic agreements with France and Russia, which operate state-backed nuclear entities that are less likely to be deterred by the liability law.

Clinton this week urged New Delhi to become a full member in the Convention on Supplementary Compensation for Nuclear Damage, which India has signed but not yet ratified. She also called for an update to the Indian legislation.

Strong domestic political pressure caused Indian lawmakers to pass the strict liability law, largely in response to past industrial disasters that left thousands dead and survivors without recourse for compensation. Experts do not believe the Manmohan Singh administration has the political capital to convince resistant lawmakers to water down the liability law to meed U.S. demands.

"The penny will finally drop on the Americans as they realize the Indian liability law cannot be diluted and they will have to look for other get-arounds like factoring in liability in the pricing structure (for reactors)," Hindu newspaper strategic affairs editor Siddharth Varadarajan said (Krittivas Mukherjee, Reuters, July 20).

Meanwhile, negotiations over an Indian-Japanese civilian atomic trade deal have hit an impasse over Tokyo's discontent with the perceived failure by New Delhi to live up to nonproliferation promises it made in 2008 in order to obtain the Nuclear Suppliers Group trade exemption, the Times of India reported on Thursday (see GSN, March 15).

"It's not about [the Nuclear Nonproliferation Treaty] which we know India is not going to sign. The main issue is that even the commitments made by the then-foreign minister in 2008 before NSG have not translated into action and this is the main problem preventing civil nuclear cooperation between the two countries,'' a high-ranking diplomat said.

Talks were last held in November 2010.

In September 2008, former Indian Foreign Minister Pranab Mukherjee issued a statement promising that his government would continue to adhere to its voluntarily suspension of nuclear weapons testing; would participate in talks for an international ban on the production of new stocks of weapon-usable material; and would work unceasingly to ensure its export control regulations met the strongest global criteria.

The unidentified Japanese source hinted that Tokyo was going to push harder for New Delhi to join the Comprehensive Test Ban Treaty, an issue on which "India has not moved" (see GSN, July 8).

It had earlier been reported that the Japanese government had chosen to break off negotiations with New Delhi and four other foreign governments following the Fukushima Daiichi nuclear plant disaster (see related GSN story, today). Informed insiders, however, dismissed those reports and said there had been no formal alternation in Tokyo's stance on nuclear trade with India.

"Japan is not going back but it needs action on the part of India to allow it to carry forward negotiations for civil nuclear cooperation with New Delhi,'' the insider said (Sachin Parashar, Times of India, July 21).