Sino-Japanese pact may be model for Japan's agreement with India

Japan and India must conclude a bilateral nuclear trade agreement in order for Japanese nuclear industry firms to sell trigger-list items to India, Japanese industry and diplomatic sources said in July.

The sources suggested that an agreement with India would be negotiated and may contain terms similar to what Japan and China had negotiated into a nuclear trade pact nearly two decades ago.

A senior Indian official said last month that India would welcome lead participation by Japanese vendors in future foreign-sourced nuclear power plant projects in India, assuming that the Nuclear Suppliers Group, or NSG, lifts trade sanctions with India. Indian diplomatic sources suggested that Japanese rules stipulate that Japan and India must conclude a nuclear trade agreement for that to happen.

On the basis of a US-India bilateral nuclear cooperation agreement that was signed in 2007, General Electric Co. is preparing to export power reactor equipment to India pending approval of the agreement by the US Congress and sanctions-lifting by NSG.

GE's partner Hitachi, however, Japanese sources said, may not export to India equipment triggering IAEA safeguards under the Zangger Committee export control list without a bilateral cooperation agreement between Japan and India. Japanese equipment manufacturers, commercial sources said, expect to figure considerably in any future GE-led project to set up BWRs in India.

Currently, Japan and India have no such agreement. Japanese industry sources last month expressed concern that delays in concluding such a pact may disadvantage Japanese equipment suppliers. Japan's leaders, these sources said, have been slower than their counterparts in France, Russia, and the US to embrace the prospect of exporting nuclear power reactors to India.

Japan presently requires that a recipient of its nuclear exports be a party to the Nuclear Nonproliferation Treaty, NPT, or -- in the case of Taiwan -- provide full-scope IAEA safeguards.

Some experts said that Japan's bilateral agreement with China may serve as the model for Japan in negotiating an agreement with India.

The Sino-Japanese agreement was negotiated before China joined the NPT in 1992. Japan agreed to supply trigger-list items to China on condition that China would put under IAEA safeguards any facility that used or installed Japanese trigger-list items. On this basis, Mitsubishi Heavy Industries, or MHI, supplied the pressure vessel for the Qinshan-1 PWR. That reactor is under IAEA safeguards.

China's signing the NPT in 1992 did not change the trade conditions imposed by Japan during the 1980s in the Sino-Japanese agreement. In recent years, China informed Japan that China, like other NPT nuclear weapons states, would refuse to safeguard power reactors for which MHI, under an arrangement with Westinghouse now terminated, anticipated it would provide trigger-list equipment.

Diplomatic and industry sources in Japan said last month that Japan could conclude with India a bilateral nuclear trade agreement with conditions similar to those it has set down for China without, however, taking any serious risk that India would refuse safeguards terms conditioned by Japan. Were the NSG to lift trade sanctions against India, IAEA safeguards would be mandatory for any project in India where Japanese vendors would be competing with other foreign vendors to supply equipment, Japanese industry sources said.

According to some of these sources, one potential impediment to future Japanese nuclear trade with India may be the Japanese Diet, because it may be asked to approve any agreement Japan and India negotiate for future nuclear commerce. "For many years the parliament has been instructed that NPT membership is an essential condition for doing business with us," one Japanese executive said.

Diet members "could change their minds," the executive said, but internal differences must first be resolved between the Ministry of Economy and International Trade, METI, and the Ministry of Foreign Affairs, over Japan's response to a US request to the NSG to give India NPT trade privileges. Both the US and India have pressed Japan to support the exemption request, Japanese officials said last week.

Created: August 13, 2008

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