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21 June 2013, Gateway House

The energy behind Kerry’s visit

India-U.S. bilateral trade stands to benefit if U.S. Secretary of State John Kerry is able to seek clarification on the specificities of the Civil Liability for Nuclear Damage Act and alleviate the worries of American energy companies which fear paying monetary damages without limit in the event of a nuclear accident

Instructor, Post University, and Documentary Filmmaker

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U.S. Secretary of State John Kerry arrives in Delhi on June 23-24 for the next round of the India-U.S. Strategic Dialogue talks, marking the fourth round of negotiations and discussions around a wide range of economic and military issues. While he has visited the country many times as an influential member of the U.S. Senate (and chairman of the powerful Foreign Relations Committee under President Obama), the visit will be Kerry’s first in his new role. For a job assessed by style points as much as substance, some analysts will undoubtedly look for a departure from the engagement and colorful enthusiasm that his predecessor, Hilary Clinton, brought to the position.  Kerry is seen as more of a traditional statesman who is less likely to begin a diplomatic visit by celebrating with schoolchildren on a dance floor than by pouring over contract legalese at a round table. That said, this visit to India is in fact very much about energy – not the energy Kerry brings to the job, but the immediate and long-term energy futures of these two international powers.

At stake in these talks is enormous potential profit for American energy companies. India-U.S. bilateral trade is already estimated at over $80 billion with $8 billion being weapons sales alone. Yet larger amounts are in the offing should Kerry successfully carry out his central mission: to obtain crystal clear contractual clarification on Indian legal positions regarding foreign nuclear suppliers’ liability for providing faulty parts that may lead to catastrophic nuclear accidents. Until now, American companies eager to land enormous contracts within India’s hopeful nuclear (reactor building) energy sector have balked at initiating concrete deals because of the Civil Liability for Nuclear Damage Act. In 2010, the controversial act became law, making companies, including foreign ones, which are deemed responsible for nuclear accidents liable for monetary damages ‘without limit’.

Even though clarifying rules were subsequently passed in 2011 in an attempt to address lingering fears, it is widely speculated that the rules’ enduring ambiguities (not to mention a pending Indian Supreme Court Public Interest Litigation case challenging their validity) have not satisfied American corporate negotiators and government advisors. Perhaps in anticipation (or in an attempt to kick-start a resolution), in June 2012, Westinghouse Electric Co and the Nuclear Power Corporation of India (NPCIL) inked a preliminary pact for an Early Works Agreement for installation of what would be the first 1,000-MW American nuclear reactor to be located in Gujarat.

If Kerry is able to guarantee a limited liability cap palatable to industry corporate lawyers, full-blown nuclear commerce can finally, in the eager eyes of those who stand to make billions of dollars, get off the starting blocks. Yet looking at the three-fold context framing this issue not only gives one pause, but suggests Kerry’s task is rather daunting to say the least:  

Advocating for construction of nuclear reactors in India when the United States itself (the largest consumer of energy in the world) has not completed any new nuclear installations in over thirty years seems hypocritical at best.

Analyses like the classic Normal Accidents by Charles Perrow still articulate the colossal problem of pinpointing the exact reasons that highly complex systems like nuclear reactors malfunction, potentially making liability ramifications a hopelessly tangled Pandora’s box that is unlikely to absolve hardware manufacturers from wrong-doing (especially if accidents result in loss of life or radioactive contamination).

And perhaps above all, initiating an embrace of nuclear reactor building in Asia in the wake of one of the region’s superpowers, Japan, abandoning its once-considered bedrock source of energy seems likely to arouse protest and widespread condemnation domestically and internationally.

These points of objection are far from easily resolvable obstacles, especially given an issue around which democratic populations believe they have earned a say.

However, not all signs are so dour or discouraging for those interested in more energy sales between the US and India. Should the nuclear prize slip through the cracks, other sources including liquid natural gas (LNG) are very likely to be discussed. U.S. representatives have indicated that its supplies of LNG will be made available to Indian markets. The hurdle of creating a legal loophole that would allow this resource to be traded with a country the U.S. does not have a free trade agreement with is likely to be overcome.

Additionally, as the Economic Times reports, Indian oil imports from Iran, one of its core oil trading partners, is down nearly 42% compared to this time last year. Given that the country was Iran’s third largest customer, a drop of this magnitude is highly significant. Moreover, given that it is the U.S. itself that is leading the charge for continued and tighter economic sanctions on Tehran, a drop in oil delivery happening at the same time as a massive nuclear construction plan between the two nations does not seem like a coincidence. The groundwork is being laid for India to need a new source of energy, and American representatives are chomping at the bit to answer the call.

In his video prelude to his official visit, Kerry noted the central role that energy will play in the discussions: “I remember fondly the intense work that we did together to get the U.S.-India Civil Nuclear Agreement approved in Congress… [And] now, as we look forward to its full implementation as soon as possible, we’re going to have to continue to cooperate together.”

That said, there will certainly be other issues on the table as well, including pressing concerns regarding potential changes to H1-B visas, always-evolving anti-terrorism measures, the streamlining of intelligence sharing protocols, and a whole host of issues. Indeed, given the continuing problems that India faces in a range of domestic spheres (articulated so well by Nobel laureate and renowned economist Amartya Sen in the New York Times on June 20) one would hope that the list of key agenda items for the strategic talks would be wide and substantive.  Yet, given the statements of both those travelling as part of the American delegation as well as the Indians receiving them, one wonders where exactly priorities lie at the moment. After all, at a meeting like this, time is limited, and, in the words of India’s ambassador to the U.S., “Energy trade is of strategic interest on both sides, and should be prioritised.”  Undoubtedly, it surely will be.

Michael Burns, Ph.D. is a university instructor and documentary film maker whose work focuses on political issues involving military conflict as well as perceptions of democracy. He is based in Mumbai.

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