Thursday, March 30, 2006

The next step in the Indo-US nuclear deal - going through Congress

I have been pondering the problems that the deal will face in the US congress. This is what I could come up with.

The Americans want India to buy a dozen or so LEU (Low Enriched Uranium) reactors. Given the extremely large number of reactors and the high price, India will ask for license production of components and assorted technology sharing. We have always done this - even with the Russians. The license production is usually accompanied by no-reverse engineering and non-competitive marketing guarentees from the Indian side. Every deal we have signed for Jaguars, Su-30s, the proposed Mirage 2000 deal etc... all fall into this logic.

Companies on the US side are keen to see this happen. The outsourcing of production of components to India will improve the competitiveness of American industry. Making them cheap in India, the Americans will be able to pull their nuclear power industry out of the hole they have dug for it. Higher profits for the nuclear industry will mean that it will be able to attract investment and George W. Bush's vision of a future powered by nuclear energy as opposed to oil will be closer to a reality.

However there is a major obstacle on this "first" route. Uranium enrichment technology is seen as having the highest proliferation risk as it is easiest to make a working nuclear bomb with HEU (Highly Enriched Uranium). Thus the transfer of Uranium enrichment related technology from the US to India will have to overcome all kinds of safeguards. Also a number of countries, especially the small countries like Germany, Netherlands, etc... which have traditionally been "willing" to "export" uranium enrichment related products will be very upset by the unfairness of it all. I can't imagine why several sections of the Russian and FSU "export" community will be very happy about the prospect of India just buying American enrichment technology off the shelf. Given how easy it is to twist things in knots in Congress, I expect numerous problems on the US side if this "first" route is followed.

A "second" route which offers an alternative to the transfer of enrichment related technology is the import of all LEU for Indian reactors. In the unlikely event that India agrees to this scheme, the proliferation risks are extremely high for LEU, and transport costs would be very high. The ability of the Indian market to support such high generation costs will be low. We will see a repeat of the Dabhol project where fuel for the power plant was imported at several times the cost of local procurement. This will create a politically unsustainable environment on the Indian side and induce extended periods of severe instability at the center.

A "third" route to pursue with regards to Indo-US nuclear trade would be to abandon the LEU fueled reactors sale altogether. A much lower proliferation risk would be to provide India loans to construct 10 reactors of the Natural Uranium fueled INDU-PHWR (Pressurized Heavy Water Reactor) variety. These reactors will then be under IAEA safeguards and there will be NSG guarentees for a supply of natural uranium. Natural Uranium has the lowest proliferation risk of all the various fuels. It is extremly painful to refine and by itself natural Uranium is harmless. The cost of transporting it would be very low. The spent fuel rods from India's "civilian" reactors will be stored under IAEA surveillance for the foreseeable future. As long as there is fuel for the reactors, India could hope to produce electricity from them and repay the loans it has taken to construct them. If the fuel supply stops, the loan repayments would automatically stop also.

The loans required to construct the INDU-PHWRs would completely change the face of Indian industry. Building so many PHWRs of such large capacity, would lead to quantum leaps in India's manufacturing ability. A major uplift of Indian industrial sector would enable India to compete for a number of large-scale manufacturing contracts. This would benifit all US industries - not just the nuclear sector - and vastly improve the global market in manufactured goods. As the US nuclear industry will be the first to avail of the improved production capacity in India for nuclear quality materials, they will still be able to retain their edge and improve their ability to attract investment.

However allowing this "third" route to materialize would require a fuller exchange of ideas between the Indian and American nuclear establishment. These contacts are currently forbidden under obsolete non-proliferation laws. These laws will have to change if the GWB's dream is to be realized at all. These minor laws are relatively easier changes to make then to have changes to export control laws on enrichment technology.

The path of least resistance appeals the most.

5 Comments:

At 10:26 AM, Blogger Dadoji said...

Good post. I will comment in brief..maybe detailed reply later...

1. I do not think we will lic the LWR tech.
2. Outsourcing by foreign cos in India will be very low though personally I would like to see that happen. Didn't happen much with Kudankulam.
3. Imported LEU will be cheaper than local fuel, not costlier.
4. Third route will be taken but not fully. We will also bring in some LWRs. That has always been my feeling and recent data revealed by Dr. Anil Kakodkar supports that.
5. There will be fusion and subsequent assimilation of selected components and sub-systems even in the new INDU-PHWRs that might come up.
6. Any which way, it augers very well for the manufacturing and construction sector.
7. Yes, we can also leverage our skills/knowledge at a global level but that is some time into the future.

 
At 11:52 AM, Blogger maverick said...

Dadoji,

I doubt if there is going to be any interest in a high number of LWRs if there is no license production in India. That is simply not the way we do things for large purchases.

Kudankulam was a very small purchase by comparison to the ten or so reactors that the Indo-US deal suggests. You can't have that big a deal go through without significant involvement of local industry. It is simply not politically sustainable at our end in India.

If nothing else, then citing energy security reasons, the Govt. of India will insist that the LEU production facility be in India. Otherwise it will be a repeat of the PL-480 rice shipment fiasco. It is difficult to imagine the GoI putting all its energy eggs in the LEU basket, without atleast having a measurable control over who holds the basket.

The cost of producing LEU in India will be high initially, because the facility itself will have to be setup. However once the refinery is set up, the LEU costs will be much much lower and the distances over which LEU has to be transported to reach the desired reactors will be smaller so the costs of shipment will be much lower as well. So over a 10 year investment term, the costs of local enrichment will be significantly lower.

A few LWRs may be of interest to us as Dr. Kakodkar suggested, but we already have Kudankulam and it is possible we may buy one or two more of that kind but the INDU is likely to remain the focus of Indian industry. As reactors go, the INDU design is a diamond in the rough and you see the INDU is our design.

A possibility is that the INDU may undergo a few system upgrades. There are definetely technologies out there that will make the INDU beyond state of the art. Mostly in the automation area but frankly we have had relatively few problems with them thus far, so I can't anticipate major technology transfers, but I think the people of NPCIL are best placed to decide what to do.

 
At 6:47 PM, Anonymous Anonymous said...

"If the fuel supply stops, the loan repayments would automatically stop also."

Couldn't the creditors then freeze the defaulter's foreign assets as well as refuse payments for its exports to those nations?

The best hedge would be to build a reasonable store of yellowcake to ride out any supply disruptions.

 
At 1:52 AM, Blogger s c r a p s s t u f f s said...

I don't understand the logic of LEU being a proliferation risk in India when we have tons of WG Plutonium and all our weapons are Pu designs. I understand if logic doesn't come into the picture.

I assume you are talking about commercial scale production of LEU. Will we have to buy tech for this from outside? If so then what is the role of the RMP? Can't we use tech developed there in a commercial plant?

How much can the base INDU design be scaled up? We are already seeing a 540 MWe design and plans for a 700 MWe design. Any scope for being able to go higher?

 
At 2:47 PM, Blogger maverick said...

anonymous,

Yes let them seize GoI's assets abroad. Its perfectly acceptable. I think that will probably be the most acceptable thing they could do.

I suppose we could buy enough Natural Uranium to hedge against supply disruptions to some extent, but the loan repayments should stop if the supply stops.

Scrapstuffs,

The Uranium industry in the West funds all these so called Non-Proliferation think tanks and between them - the hype has rendered the mere mention of the word Uranium a proliferation risk - what to say of actual LEU sales!

If we are to do commercial LEU production then RMP will have to be scaled up by several orders of magnitude. The RMP is still at the technology demonstration level, it is mostly a basic sciences lab that is doing some applied work. To convert it up to a fully functioning LEU factory like the ones the Pakistanis have, that will cost a lot of money. And unlike the Pakistanis we can't sell heroin or nukes to pay for this kind of thing. No prizes for guessing that I am supremely anti-enriched uranium.

The Canadians have 1000 MW PHWRs, I suppose the INDU can have similar sizes. The limitations might be in the field of manufacturing not so much at the design end. I seem to recall reading a number of papers by A N. Prasad and the Reactor Group people where they described a lot of problems with making things like pressure vessels and endcaps.

 

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