India Unmasks America's Nuclear Liabilities
Private companies should insure themselves, not ask Delhi to do it for them.
India's parliament last week gave the U.S. nuclear industry the legal equivalent of a Bronx cheer: It passed a law that denied American firms legal immunity from being sued in the event of a nuclear accident. Besides upsetting executives at General Electric and Westinghouse, the law's passage destroys one of the 2008 U.S.-Indian nuclear deal's key pitches—that it would energize the "world's largest democracy" with up to $150 billion in U.S. reactor sales.
The U.S. is up in arms, so to speak, because private American firms can't take on such risk—but their French, Russian and other state-backed competitors can. U.S. diplomats preparing for President Obama's planned November visit to New Delhi are lobbying their counterparts furiously to "fix" the situation. It's unclear if they'll succeed. But for everyone's sake, I hope they won't.
Indians have little to gain from caving to U.S. pressure. Having suffered thousands of fatalities from the 1984 Bhopal incident and having received a pittance from Union Carbide in compensation, Indians are not just making an anti-imperialism point in protesting attempts to shield U.S. nuclear firms from accident liability. They are protecting their population's security.
New Delhi's policy makers also understand that the demand for such immunity is coming from Washington. France and Russia have voiced some concerns but ultimately they and other foreign nuclear suppliers know that any Indian litigant would face impossible odds if they tried to secure compensation from government-backed firms through their court systems. That's not to say they wouldn't grant India an out-of-court settlement—after all, expressly protecting the right of Indians to sue foreign nuclear vendors, as the current laws does, gives life to a legal claim. On the other hand, granting immunity to foreign nuclear vendors as Washington wants would risk forfeiting even that, as well as prohibiting Indians from ever getting into corporate America's deep pockets.
Then there's the ugly truth that India has little or no need to buy American. Russia, France, Japan and even China have competitive nuclear companies. India also can build its own fast and heavy-water nuclear reactors. Finally, despite India's ambitious plans for nuclear expansion, nuclear electricity is still one of the most uneconomical ways for it to meet its near and mid-term power requirements. As a Dalberg Global Development Advisors study recently noted, India's economic and energy-security targets through 2035 could easily be reached without significantly increasing nuclear power. The most cost effective way for India to reduce its carbon emissions is to invest in clean coal technologies, demand-side management systems and renewable energy.
Rather than afford India more help on these fronts though, the White House and U.S. State Department officials are now straining to figure how to work around India's new law. One idea is to get President Barack Obama and Prime Minister Manmohan Singh to trump it by striking a bilateral agreement in which India would pledge to indemnify all foreign nuclear firms. Another is to get Mr. Singh to nullify the law using former U.S. President George W. Bush's favorite ploy—a presidential signing statement explaining how he intends to ignore certain provisions. Finally, some analysts have suggested that India's sole nuclear operator, India Nuclear Power Corporation of India Ltd., could end run the law by signing all foreign nuclear contracts and promising to assume any foreign firms' liabilities.
All of these options may be clever but if any were seriously pursued, they would do more to poison U.S.-Indian relations than any problem the original nuclear deal was designed to address. It would also be a difficult political decision for President Obama, who would in effect be stepping in at the behest of two of America's largest corporations.
Instead, Prime Minister Singh and President Obama should focus on what both countries need and want most: For India, more U.S. student and business visas for India along with lower U.S. tariffs on Indian goods; and for the U.S., Indian business and legal reforms that would make American investment in India safer and easier. What's needed most is for both governments to get out of the way of increased people-to-people contacts and trade.
For America's nuclear industry, India's nuclear-liability law ought to be seen as a helpful wake-up call. U.S. nuclear firms have been trying for years to get the international community to grant all nuclear vendors accident liability immunity by promoting the Convention on Supplementary Compensation for Nuclear Damage, an International Atomic Energy Agency initiative. Despite 13 years of jawboning, though, most major nuclear operators are still not on board. More important, domestic U.S. legal nuclear liability caps will sunset in 15 years and leave firms totally exposed in the case of a nuclear accident. That's not much time. Rather than play politics, India's law ought be seen as the necessary prod to get U.S. industry moving now on increasing its self-insurance levels.
Washington officials, meanwhile, should see the law as India intended it—a graceful way to change the focus of U.S.-Indian relations to more important non-nuclear topics. If Washington fails to seize on this, it won't be India's fault, it will be America's.