The U.S.-India Civil Nuclear Deal of 2008, which included the historic 123 Agreement, marked the beginning of civil nuclear cooperation between India and the U.S. This deal stands as one of the most ambitious and landmark agreements between the world’s oldest democracy U.S. and the largest democracy India. But Why is It Going Nowhere? Let us Understand.

At the time, despite criticisms, it was hailed as a significant diplomatic success for the U.S., serving as a potential diplomatic strategy to reduce India’s traditional dependence on Russia and foster stronger bilateral ties and trade. This out-of-the-box diplomatic effort aimed to bring a new era of cooperation to life.

In hindsight, it was strategically advantageous for the U.S. to establish a counterbalance to China’s rapid growth in Asia, particularly in the Pacific region. The U.S. aimed to support India’s rise as a significant power in South Asia, thereby creating a challenge for China in the long run.

For India, the deal was a game-changer, ensuring access to civil nuclear technology and uranium, the crucial fuel needed to power its nuclear reactors. Despite its potential mutual benefits, the implementation of the Indo-US 123 Agreement has been slow and fraught with constraints. The continued delays and India’ s evolving energy needs

What is a 123 Agreement?

A 123 Agreement is a legally binding agreement between the United States and another country for peaceful nuclear cooperation. The agreements are named after Section 123 of the U.S. Atomic Energy Act of 1954.

Key Points in the 123 Agreement under U.S.-India Civil Nuclear Deal:

• The NSG (Nuclear Suppliers Group) waiver granted to India in 2008 was a significant milestone under the 123 Agreement, also known as the U.S.-India Civil Nuclear Agreement. This waiver allowed India to engage in civilian nuclear trade despite not being a signatory to the Nuclear Non-Proliferation Treaty (NPT). As expected, China Opposed and raised concerns about the implications for regional security and non-proliferation norms.
• Separation Feature: 123 Agreement was instrumental in allowing India to clearly delineate its civilian and military nuclear facilities. By placing its civilian nuclear facilities under IAEA safeguards, India demonstrated its commitment to non-proliferation while gaining access to international nuclear technology and fuel. This separation was a key condition for the waiver and helped build trust in India’s nuclear intentions on the global stage.
• It refrains India from transfer of enrichment and reprocessing technologies to states that do not have them and India should also support international efforts to limit their spread.

Prudence demands that we must widen our energy options. I am not saying that nuclear energy will provide the final answer. All I am saying is, as I understood, all development is about widening human choices. And, when it comes to energy security, widening our choices means that we should be able to make effective use of Nuclear Power. If you are planning for a future and the future is inherently uncertain, you run the risk that you may go wrong. But we live in a world, where change is the only constant.

This country has to be prepared to think big about its future and if that is the vision, that is the mission, then, I sincerely believe the path that we have identified is the right path. There are tigers on the prowl on the streets of Delhi. I am aware of the risks but for India’s sake, I am willing to take those risks. We are very firm in our determination that agreement with United States on Civil Nuclear Energy in no way affects the requirements of our strategic program. We are fully conscious of the changing complexity of the international political system.

Prime Minister Dr. Manmohan Singh in Rajya Sabha Statement to the House Chairman in August 2006 on U.S.-India Nuclear Deal

After signing 123 agreement, India also entered into individual nuclear cooperation agreements for peaceful means with the US, France, Russia, Canada, Argentina, Australia, Sri Lanka, United Kingdom, Japan, Vietnam, Bangladesh, Kazakhstan and Korea.

Subsequently, India has had specific agreements for import of uranium from France, Kazakhstan, Australia, Canada and Russia.

India has also developed PHWRs (Pressurized Heavy Water Reactors), Which are the pillars of India’s nuclear power generation. PHWR is a nuclear power reactor, commonly using unenriched natural uranium as its fuel. It uses heavy water (Deuterium oxide D2O) as its coolant and moderator.

India’s’ indigenous 3-Stage nuclear program also was not get affected by this agreement. Its full autonomy has been preserved. With the signing of 123 Agreement, U.S. accepted India with the recognition of being a responsible nuclear weapon state with strong non-proliferation credentials.

The whole purpose of the advanced energy initiative is to end our dependence on oil, and as we develop technologies that will enable us to do so, we look forward to working with India so we can achieve the same objectives. Dependency upon fossil fuels causes, particularly during times of shortage, causes prices to rise in both our countries. And it’s in our interests that we share technologies to move away from the era of fossil fuels. What this agreement says is things change, times change, that leadership can make a difference, and telling the world — sending the world a different message from that which is — what used to exist in people’s minds.

George W Bush, President of the United States at Hyderabad House, New Delhi

What is India’s 3-Stage Nuclear Program and How it became a last-minute hurdle?

In the 1950s, the renowned physicist Homi Bhabha developed India’s three-stage nuclear power program, to ensure India’s long term energy security, independence and sustainable development, using uranium and vast thorium reserves.

The three stages are:

• • Natural uranium fueled Pressurized Heavy Water Reactors (PHWRs)
  • Fast Breeder Reactors (FBRs) utilizing plutonium-based fuel
  • Advanced nuclear power systems for utilization of thorium

Thorium is particularly interesting for India, as India has a mere 1–2% of the global uranium reserves, but one of the largest shares of global thorium reserves (~25%).

However, thorium is more difficult to use than uranium as a fuel because it requires breeding, and global uranium prices remain low enough that breeding is not cost effective, for which DAE India is conducting Research & Development Works.

The 3-Stage Nuclear Program is expected to allow the country complete self-sufficiency in nuclear energy.

The Indian delegation was concerned that the draft agreement’s terms closely aligned with the U.S.’s demands. Additionally, there were worries about the constraints it placed on India’s strategic 3-Sstage nuclear program.

It’s an unprecedented deal for India. If you look at the three countries outside the Nuclear Non-Proliferation Treaty (NPT)-Israel, India, and Pakistan-this stands to be a unique deal.

Charles D Ferguson, Science & Technology Fellow at Council on Foreign Relations

At the urging of U.S. Secretary of State Condoleezza Rice, the Indian delegation, led by Prime Minister Manmohan Singh, chose to make one final attempt. The prime minister called for Anil Kakodkar, Chairman, Atomic Commission of India to join the discussions, who in turn, handed over his 2-sentence suggestions written on a tissue paper to the Prime Minister, which played a crucial role in clinching the deal by resolving the last-minute hurdle.

“They were words to the effect that the autonomy of our three-stage strategic program should not be restricted in any way.”

Neerja Chowdhury (Indian Journalist)

This means that India will not be constrained in any way in building future nuclear facilities, whether civilian or military, as per our national requirements

 Teresita Schaffer– Director of the South Asia program at the Centre for Strategic and International Studies

The Roadblocks in Implementation till date:

• U.S. Company Westinghouse went into major cost overruns in 2008 amid a global financial crisis in 2008, leading to dilution of the deal in the initial days. The Company was not in a position anymore to construct nuclear power projects in India anymore and limited their contribution to only supply of reactors and components.
• The implications were clear, liability of U.S. Companies in the deal became uncertain in case of any unforeseen risks, like Fukushima accident in Japan.
• India also looked more comfortable in an existing nuclear agreement with Russian company Atomstroyexport.
• Negotiations between India and France (U.S. Ally) for six 1,650 MW European Pressurized Reactors (EPRs) in Jaitapur, Maharashtra, are delayed due to disagreements between the Department of Atomic Energy and the French electricity utility EDF regarding the cost per unit.
• The US has been discussing the sale of nuclear reactors to India since the 2008 pact, two subsequent agreements were signed only in 2016 and 2019.
• A project proposal to set up six reactors in collaboration with Westinghouse Electric Company (WEC) has been announced, but work is yet to begin.
• Another major project involving the French state-owned operator Areva, which was subsequently taken over by the French electricity utility EDF is also delayed.

“We knew that we had limitations on nuclear trade, so there was a need for progress within,”

Anil Kakodkar, the former chairman of the Atomic Energy Commission

Nuclear Liability Law in India is a Concern for American Suppliers:

India’s nuclear liability laws, which hold the operator (rather than the plant manufacturers) responsible for any accidents, created apprehension among potential foreign suppliers. This legal framework discouraged American companies from supplying nuclear reactors to India.

The act includes a provision for the right of recourse, which allows the operator to seek compensation from suppliers if the accident is due to the supplier’s fault. Suppliers like GE-Hitachi and Westinghouse are wary of the potential financial exposure and liability risks. The right of recourse means they could be held financially responsible for accidents, which is not the norm in many other countries

Hence, 123 Agreement, despite being a landmark nuclear deal between U.S. & India, civilian nuclear cooperation has not progressed significantly. In the realm of international politics, alliances and adversaries are not fixed; only interests remain constant. Therefore, India should persist in its foreign policy of strategic hedging.

The relationship between India and the U.S. is crucial for shaping the global order in the 21st century. To fully gain the potential of this partnership, both governments need to work on finalizing pending agreements and charting a path towards a Comprehensive Strategic Global Partnership.