The fate of a landmark nuclear deal between the U.S. and India is under threat partly due to developments in Japan, including the financial crisis facing Toshiba and the escalating political crisis embroiling Japanese Prime Minister Shinzo Abe over his ties to a right-wing school.
The move by Westinghouse Electric, Toshiba's U.S.-based nuclear subsidiary, to file for bankruptcy protection on March 29 means that the U.S. and India will miss a June deadline for finalizing a contract for Westinghouse to build six reactors at a single site in southeastern India.
Hailing the planned construction in a June 2016 joint statement, former U.S. President Barack Obama and Indian Prime Minister Narendra Modi said: "Once completed, the project would be among the largest of its kind, fulfilling the promise of the U.S.-India civil nuclear agreement and demonstrating a shared commitment to meet India's growing energy needs while reducing reliance on fossil fuels."
Unlike America's 2015 deal with Iran, which was designed to prevent Tehran from developing nuclear weapons, the deal with New Delhi unveiled in 2005 focused on energy generation while recognizing the reality of India's nuclear weapons capability. But years later, the deal has not delivered any tangible energy benefits to India, although the larger strategic framework in which the agreement was embedded has helped make the U.S. the largest source of arms sales to New Delhi.
Rarely has the U.S. acquired a major arms client of India's size so rapidly. The nuclear deal has also fostered growing strategic cooperation between the two countries.
The latest developments, however, indicate that the deal's nuclear commercialization is still not within sight. Indeed, there is a distinct possibility that the deal could turn out to be a dud on the energy front.
Abe's political travails, for example, have injected uncertainty over whether the Japanese Diet, or parliament, will ratify the country's separate nuclear deal with India, signed last year. The agreement was six years in the making largely because it was controversial in Japan, representing the first such accord with a country that is not party to the 1970 Nuclear Nonproliferation Treaty.
Due to Japan's global role as the leading nuclear equipment supplier, the Diet's ratification of the agreement with New Delhi is essential to opening the path to the U.S.-India deal's implementation. Japan is the world's leading supplier of heavy nuclear forgings, with just one Japanese company -- Japan Steel Works -- controlling 80% of the global market for large forged components for light-water reactors, the most prevalent type in the world.
In addition to Toshiba owning Westinghouse, America's General Electric and Hitachi of Japan jointly own another U.S.-based reactor vendor, GE-Hitachi. India has earmarked at least one nuclear park containing a cluster of reactors each for Westinghouse, GE-Hitachi and France's state-owned Areva. Until it went bankrupt, Westinghouse was in the lead to clinch the first Indian reactor contract under the U.S.-India deal.
Westinghouse's massive losses have left Toshiba tottering on the brink of collapse, with the parent company's liabilities greater than its assets. Toshiba is jettisoning its lead role in projects to build commercial nuclear plants in India and Britain. By exiting from the overseas nuclear power construction business, Toshiba intends to focus on maintaining existing reactors and developing new plant designs.
The paradox is that the promise of the U.S.-India nuclear deal contributed to Toshiba's agreement to the overpriced $5.4 billion acquisition of Westinghouse from Britain's BNFL in 2006. That purchase turned out to be a huge blunder, saddling Toshiba with cumulative losses that have now put its own 140-year existence in serious jeopardy. India's plan to import more than $100 billion worth of reactors had promised to revive the dormant U.S. nuclear power industry.
Toshiba now faces the danger that the U.S. nuclear market could become its graveyard. On the verge of disintegration, the Japanese conglomerate is staring at a staggering $9 billion net loss in the financial year ending March 31 because of Westinghouse. Westinghouse's imprudent acquisition of a heavily indebted U.S.nuclear construction service company, CB&I Stone & Webster, in late 2015 proved the proverbial last straw for Toshiba.
Meanwhile, the U.S.-India deal's prospects have been further dimmed by the financial troubles of the other two leading reactor vendors, Areva and GE-Hitachi.
Like Toshiba, Areva's very survival is at stake. It needs at least a 5 billion euro ($5.38 million) bailout from the French government to stay afloat. Such a rescue package has to await the outcome of the French presidential election. Areva is likely to be split, with its reactor unit being sold to France's state-owned EDF. Economic viability concerns have already prompted GE-Hitachi to trim down its nuclear operations.
Against this background, it is apparent that the U.S.-India deal raised false hopes at a time when nuclear power was already in decline globally. Indeed, India, in announcing plans for a huge expansion of its installed nuclear power generating capacity, fell victim to its own hype over the deal.
Two successive Indian governments went out of their way to accommodate U.S. commercial interests in order to implement the deal. For example, an Indian law that allowed suppliers to be held liable in case of a nuclear accident was reinterpreted through executive action to effectively transfer accident liability risks from the reactor vendors to Indian taxpayers. New Delhi also reinterpreted another provision so that victims of a potential accident would be barred from suing for damages in another country.
These actions were controversial as a result of India's bitter experience over the 1984 gas leak from an American-owned chemical plant in Bhopal city that killed an estimated 16,000 people, about the same number as died in Japan's 2011 Tohoku earthquake and tsunami, which triggered the Fukushima nuclear disaster.
India refused to heed the lesson from Japan's liability laws that indemnify nuclear suppliers and make plant operators exclusively liable. GE built or designed all three Fukushima reactors that suffered core meltdowns, yet the U.S. company did not have to pay any damages despite a fundamental design deficiency in the reactors.
As part of the Paris climate-change accord, India is committed to reducing the carbon intensity of its economy by about a third by 2030, which will require it to generate 40% of its electricity from non-fossil fuels. Yet it is set to slip badly on its 2030 target to triple its installed nuclear power generating capacity in order to produce 12% of its electricity from atomic sources.
In addition to the dire financial state of the foreign companies that are planning to build reactors in India, a fundamental impediment is the increasingly poor economics of nuclear power globally. Skyrocketing construction costs, made worse by post-Fukushima safety upgrades, have made nuclear power uncompetitive.
Nuclear power constitutes the world's most heavily subsidized energy industry. But nuclear power plant operators want even greater state subsidies to survive, while reactor builders are sinking in debt. For example, in the U.S., where four nuclear plant closures have been announced, utilities are seeking additional subsidies to keep other plants operating. Given the exorbitant price sought by Westinghouse or Areva for selling reactors, India would have to heavily subsidize the electricity from such plants.
Add to the picture the growing grassroots resistance in India to new nuclear power plants. Such resistance resulted in considerable delays in commissioning the Russian-type Kudankulam plant, located at the southernmost tip of India, and forced the shifting of Westinghouse's nuclear park from Gujarat state to distant Andhra Pradesh state.
Safety concerns at the grassroots have been exacerbated by the government allocating Fukushima-type multi-plant nuclear parks to Westinghouse, GE-Hitachi and Areva, each of which is to build prototype reactor models currently not in operation anywhere in the world. The accident-stricken Fukushima reactor models were also the first of their kind. India's planned introduction of several different reactor technologies from overseas will also compound maintenance challenges.
Nuclear power faces an uncertain future worldwide. Areva's Finnish reactor project at Olkiluoto -- currently almost a decade behind schedule and billions of euros over budget -- symbolizes the nuclear industry's murky future. India is in no position to buck this trend.
India undoubtedly faces difficult choices, given its modest domestic energy resources. Tax breaks and other incentives, however, are significantly boosting the share of renewables in its energy mix. India now generates more power from wind than from nuclear, while rapidly falling tariffs for new projects are beginning to make solar power competitive. Integrating renewable generation with natural gas plants will help cut carbon emissions and ensure a stable and growing supply.
Brahma Chellaney is a geostrategist and the author of nine books, including the award-winning "Water, Peace, and War."