Obama And Modi: In Ain't Over Until The Fat Lady Sings

NEW DELHI: Prime Minister Narendra Modi has crossed the Rubicon insofar as relations with the United States is concerned. He has made former Prime Minister Manmohan Singh’s efforts that were criticised at the time by the Bharatiya Janata party as well as other opposition parties look pale in comparison to his tight embrace that has ensured a highly successful visit for President Obama.

The American President on his last leg at home is returning with the nuclear deal operationalised on his terms and not that of India, promises of close cooperation in the Pacific Asia region, renewal of the Defence Framework Agreement with expectation of high tech cooperation, with intelligence sharing, business and trade all thrown in heavy measure to give teeth to what both describe now as a “natural partnership.”

PM Modi who had been refused a visa by the Obama administration for the Gujarat violence walked the extra mile during his visit to the U.S. last year where he broke the ice with President Obama over two meals just four months ago. Since then officials of both sides have been hammering away at the nuclear agreement, seeking a way out of the six year impasse by circumventing the Civil Nuclear Liability Act that was passed by Parliament with the full support of the BJP. Relations between Washington and Delhi soured as a result of this legislation with Prime Minister Manmohan Singh who had personally steered the civil nuclear energy agreement through many a hurdle finally giving up even trying at this stage.

For the US this law became a major bone of contention with India, seen as an affirmation that India could not be trusted to deliver. When PM Modi decided to place the US at the pinnacle of his foreign policy last September, the Americans were clear that he would have to walk the talk by circumventing the Liability Act. He clearly agreed and a contact group of officials as well as representatives of US nuclear companies was set up and they have had three meetings in an effort to ensure that the right to recourse for suppliers liability is circumvented. In that, under the law the US suppliers are responsible to pay the liabilities in case of a nuclear accident with the Bhopal Gas leak providing the backdrop to this essential clause. The US has made it clear that it cannot be party to this, and that the expenses and responsibility of a nuclear accident will have to be born by the operator namely the Indian public sector that will be signing the agreements for nuclear reactors.

Foreign Secretary Sujatha Singh said that the “deal was done” and the contact group had agreed that the Nuclear Liability Law was in conformity with the Convention on Supplementary Compensation for Nuclear Damage. Both sides have also agreed to the Administrative measures to accompany the 1.2.3 agreement. The devil of course remains in the details and these have still to be shared by the two governments with the media in terms that make sense. Interestingly the Americans have claimed that India has agreed to their terms, and not the other way around as the Indian foreign office officials have been insisting. The White House said the understanding on the India's civil nuclear program resolves the U.S. concerns on both tracking and liability. "In our judgment, the Indians have moved sufficiently on these issues to give us assurances are resolved," said Ben Rhodes, Obama's deputy national security adviser. The U.S. and India had entered a logjam with the former insisting on tracking fissile material that it supplies to India, and the Indian liability provisions that the American firms are not willing to accept. Under the CLND Act 2010, the operator that is India is required to set aside Rs 1,500 crores in case of a disaster and pay the affected parties. The operator can seek Right to Recourse from the suppliers, which makes investment in the nuclear sector by foreign players more difficult. The government had asked the General Insurance Company (GIC) to insure the atomic power reactors, but it did not have the finances.

So the proposal which was floated but which had not clinched the deal in London ---and seems to have got the political nod now---is for the four government insurance companies to pool in their resources that come to Rs 750 crores which is half of the required amount. Initially the Finance Ministry had said it could not fill the gap but now appears to be willing to put in the remaining Rs 750 crores into the pool. These ‘catastrophe bonds’ are in use in the US and Europe but will place a major burden on the Indian insurance sector if there is a nuclear accident. If this proposal is what has been accepted then the White House officials are right, India has succumed to the US demand that had held up the nuclear deal for six long years.

The Defence Framework Agreement between the US and India has also been signed for another ten years The Framework Agreement signed in 2005 contained provisions such as the Logistics Support Agreement and the Communications and Information Security Memorandum of Agreement (CISMOA) which would have made India a military ally of the US on par with its NATO allies. The Modi government has gone several steps forward and will be discussing advanced cooperation with the American private companies and the government over the next months.

Two issues of course are of interest and indicate a swing in Indian policy. One is the reference to India-US cooperation in the Pacific and Asia region by PM Modi himself. This has immediately been linked to the US-Australia-Vietnam-Japan cooperation against China in the Pacific waters and will draw reactions and repercussions over the next days and weeks.

The second issue is of Climate Change where Washington was visibly irritated with India. PM Modi has now in a seeming turnaround, although as yet unstated in clear terms, has spoken of the peoples realisation for a safe and clean environment and that the Indian policy and position will be derived from this.