IT was only to be expected that the Indian discourses regarding the nuclear deal with the United States remained within narrow groves. Apart from the overall decline in intellectual power in the country during the recent decades of our tryst with middle class consumerism, different constituencies viewed the nuclear deal from their limited perspectives. As in the fable of the four blind men and the elephant, the ‘Big Picture’ continued to elude. It is available with the Bush administration in Washington – and, Indian officials would have snatched glimpses of it now and then.

Four distinct constituencies in India have participated in the debate over the nuclear deal: (a) India’s nuclear establishment which wants an indigenous route of research and development of nuclear technology remaining open; (b) ‘swadeshi’ camp which abhors any ‘capping’ of India’s nuclear weapon programme or any precise definition of what constitutes India’s ‘minimum deterrent’; (c) energy experts who evaluate the relative techno-economic merits of different forms of energy; and, (d) opinion-makers committed to the Indo-US ‘strategic partnership’.

The controversy burst into our consciousness with abruptness in the past few days regarding Russia’s willingness to supply nuclear fuel for Tarapur Atomic Plant Station in response to the urgent Indian request at the level of Prime Minister Manmohan Singh to Russian President Vladimir Putin, and Washington’s resentment of any such Russian-Indian transaction.

Our discourses failed to prepare us for it. We didn’t suspect that the Indo-US nuclear deal had such a backdrop. A recent commentary in the US government-funded Radio Liberty and Radio Free Europe should have prepared us for it, though. The commentary said: ‘The Arms Control Commission reported in November 2000 that Russia and India signed a secret memorandum of understanding on 4 October 2000 to pursue future "cooperation in the peaceful uses of nuclear energy".’ The memorandum was one of several agreements, including a declaration of strategic partnership, signed during Putin’s October 2000 visit to New Delhi.

‘In an apparent move to counteract this agreement, the US signed an agreement in March of this year (2006) to supply India with fuel and nuclear technology for peaceful purposes.

‘The very day when US President George W. Bush signed the pact with India, Putin told a press conference in Prague that Russia would fight any restrictions placed on its atomic energy operations in Europe. "Unfortunately, we are facing certain restrictions, attempts to limit our operations in nuclear energy and in power engineering in the European market", Interfax quoted Putin as saying on March 1. "We are not dramatising this but we are striving for equality".’¹

 

Russia’s steady emergence as the energy superpower of the 21st century has alarmed the United Sates. Russia holds 45% of the world’s gas reserves, 13% of oil, 23% of coal and 14% of uranium. By 1990, worldwide extraction of oil amounted to 18% of global reserves and 13% of gas, whereas in Russia the figures were 12% and 3% respectively. Since 2000, in comparison, Russia accounted for 40% of the increase in global oil output, thus emerging as a decisive factor in maintaining the balance of oil supply and demand.²

How does this translate in political terms? First, Russia’s re-emergence on the global scene as an influential, independent player remains critically dependent on its revenues from oil and gas exports. Vladimir Putin kept three broad objectives in view while crafting Russia’s energy policy. He visualised Russia re-establishing its legitimate role and influence in the international system based on market forces rather than on Russia’s military prowess or even in terms of the share of its GDP in global terms. Second, the revenues generated by the oil and gas companies in Russia (which Putin brought under state control) would sustain Russia’s overall economic growth and provide the federal budget surpluses (which, in turn, has made possible the significant rise in per capita income levels fuelling the current consumption boom in Russia). Third, Putin prioritised the energy industry as the locomotive that would lead Russian economy and business integration into the global economy.

At the current rate, for every single dollar increase in price above the 25-dollar level for a barrel of oil, the Russian exchequer earns three billion dollars annually. With oil prices hovering around 60 dollars per barrel, this ‘additionality’ worked out to 150 billion dollars in 2005. No wonder Russia could boost budget outlays fourfold from 34 billion dollars in 2000 (when Putin came to power) to 130 billion dollars in 2005. Budget expenditures and tax revenues are estimated to be 150 billion and 177 billion respectively in 2006.

 

Russia’s ‘Great Power’ aspirations are not particularly exorbitant. To quote Ira Straus, US Coordinator of the Committee on Eastern Europe and Russia in NATO, ‘It (Russia) wants to be a Great Power globally in the sense that it wants to be consulted and have an influence on global policy, particularly on the policies of the United States and the American-led group of western powers. Russia wants to be a Great Power locally in the sense of having a predominant influence on the former Soviet republics, or at least a share of influence not less than that of the West. It is anxious to arrest the sharp erosion of its influence that has proceeded in phases ever since the formation of Popular Fronts in the Gorbachev era, an erosion that continues even today with a process of nativisation similar to that which has taken place in the post-colonial countries throughout the Third World.’³

But, an antagonistic view of the paradigm prevails in the West. Russia provides almost half of the European Union’s natural gas and a third of its oil needs. This is perceived as a perilous European dependence on Russia. (Arguably, any serious disruption in Russian delivery to Europe may hurt Russia more than its EU consumers since EU accounts for 70% of Russia’s energy exports.)

 

The EU and the US are bracing for a showdown with Russia over energy security issues. The EU’s foreign policy chief, Javier Solana wrote on March 8, ‘Russia’s recent disputes with Ukraine, Georgia and Moldova over the terms of gas supplies have concentrated our minds.’ Solana under-lined that ‘Energy has shot to the top of the European and wider international agenda… We already rely on external sources for 50% (energy needs)… this will rise to 90% for oil and 70% for gas by 2030.’ Therefore, Solana argued, ‘Europe must talk together as Europeans’ with the energy supplying countries, besides resorting to ‘concerted action on the external side.’ Solana’s logic was simple: ‘If you negotiate together, you will have more influence.’ As regards Russia, since 20% of its export earnings come out of gas exports to Europe, it is a relationship of interdependence. ‘The question is not whether energy and politics are connected but how. We have to find the right balance between a market-driven and a more strategic approach.’

 

Javier Solana, who seldom initiates discussions without first sounding out Washington, went on to suggest that Europe should coordinate with other consumers ‘such as the US, China and India’ so as to give ‘more prominence to energy issues in our political dialogues with producers such as Russia, Saudi Arabia, Algeria and others.’

Further: ‘What we need is an orderly combination of markets, law and consensual negotiations… For global security, it is vital that China, India and others believe that a predictable and transparent global energy order will work for them, too. The role of politics is to balance different considerations – for instance, energy versus non-proliferation or human rights concerns.’⁴

Indeed, in a ‘Green Paper’ released on March 8 in Brussels, the European Commission set out its vision for an Energy Strategy for Europe inviting comments on six specific priority areas, containing over 20 suggestions for possible new action.⁵

Meanwhile, Moscow has responded by intensifying its energy diplomacy in the recent weeks and months.⁶ Putin visited Algeria on March 8 to cement a new strategic relationship by signing an unprecedented 7.5 billion dollar arms deal, whose financial underpinning shall be provided through a complex web of Russian participation in Algeria’s energy sector. (Algeria is Europe’s only realistic alternative gas supplier to Russia.) Again, Putin pushed Russia’s energy expansion into Central Europe by visiting Hungary and the Czech Republic.

Washington’s response has been swift. Echoing Solana’s thoughts, the influential chairman of the US Senate Foreign Relations Committee, Richard Lugar, in a keynote speech at the ceremony marking the 90th anniversary of the Brookings Institution in Washington on March 13 unrolled his plan for introducing an Energy Diplomacy and Security Act in the US Congress, taking into account that ‘energy is the albatross of US national security… oil will become an even stronger magnet for conflict and threats of military action than it already is… foreign governments control up to 77% of the world oil reserves through their national oil companies.’

 

Senator Lugar emphasised that the Energy Diplomacy and Security Act would demand that the US expanded its international cooperation on energy issues. ‘A particular priority is to offer a formal coordination agreement with China and India as they develop strategic petroleum reserves. This will help draw them into the international system, providing supply reassurance, and thereby reducing potential for conflict. The bill would also stimulate regional partnerships in the Western Hemisphere.’

Senator Lugar put his finger where it hurts US interests most. He said: ‘The Chinese and Indians, with one third of the world’s people between them, know that their economic future is directly tied to finding sufficient energy resources to sustain their rapid economic growth. They are negotiating with anyone willing to sell them an energy lifeline.’ He went on to criticise the US energy diplomacy as not being hard enough in safeguarding American strategic interests vis-à-vis the perceived predatory moves by China and India.

Elaborating on the US ‘threat’ perceptions on the energy front, Lugar said that worldwide oil and gas reserves are diminishing. ‘This is occurring within the context of explosive economic growth in China, India, Brazil and many other nations. The demand for energy from these industrialising giants is creating unprecedented competition for oil and natural gas. In the decades to come, price will not be the only issue. We will face the prospect that the world’s supply of oil may not be abundant and accessible enough to support continued economic growth in both the industrialised West and in large rapidly growing economies… in such circumstances, nations would become desperate, increasing the chances of armed conflict. The use of energy as a weapon might require NATO to review what alliance obligations would be in such cases.’

 

Some important points emerge from the above. First, the US and Europe are determined to oppose Russia’s expansion of global influence through the use of its energy resources as a political weapon. The best scenario for the US and Europe will be to relegate Russia to a status as their energy appendage. But Putin forestalled such a fate for Russia by re-establishing state control over Russia’s oil and gas industry and energy resources. (Washington’s fury over the Yukos affair and the vicious campaign over Putin’s alleged ‘authoritarianism’ should be viewed in perspective.) Therefore, estimating that the West’s dependence on Russian energy will only increase in the coming decades, US and Europe hope to leverage their interests collectively with China and India.

But that is not the entire picture. The EU and US apprehend that China and India are harbouring ambitious plans to buy stakes in Russian oil producers at the highest possible price so as to guarantee their oil supplies. Possibly, China and India may even buy into top Russian oil majors such as Rosneft, given Moscow’s warm relations with Beijing and Delhi. Equally so, China and India are increasingly gaining access to Russian energy resources in Siberia, the Far East and Sakhalin. China and India are ‘locking in’ Russian resources precisely when Europe and the US seek to broaden their own presence in the Russian energy sector.

 

These western ‘threat perceptions’ are not confined to oil and gas only. Washington is also viewing with disquiet Moscow’s moves to expand its profile in the field of nuclear energy – at a time when the US is resuscitating the export potential of its own nuclear industry.

Russia is actively embarking on an overhaul of its nuclear industry on the same lines it restructured its gas and oil companies in the past couple of years. The Moscow Times reported on March 7 quoting Russian officials that the main holdings in the Russian nuclear industry – Rosatomenergo (responsible for running nuclear power stations), Tvel (concerned with nuclear-fuel manufacturing), Atoms-troieksport (which builds nuclear power stations abroad) and Tekhna-beksport (responsible for export of nuclear machinery and fuel) – would be incorporated as joint stock companies with the Russian state being the sole shareholder, and would be brought under a new umbrella organisation.

Russia envisages a vastly expanded role for nuclear power in its overall energy balance. Russia at present produces around 2900 tons of uranium. Besides, Uzbekistan, which is a key ally of Russia, holds extensive reserves of uranium ore. The head of Rosatom, Russia’s federal atomic energy agency, Sergei Kiriyenko stated recently that Russia intended to build 60 atomic reactors abroad.

Without doubt, Russia is aspiring to become a hub for supplying nuclear fuel and services to the world market. Washington sees these moves as boosting Russia’s capabilities further as an energy supplier for potentially huge consumers like India and China, which Washington too is eyeing as prime markets for its nuclear industry.

 

Putin’s offer to build an international centre in Russia for nuclear fuel was viewed with extreme disquiet by the US. Speaking in St. Petersburg on January 25, Putin called for the establishment of a global infrastructure that would give access to all interested countries access to nuclear energy with guarantees that the nuclear non-proliferation regime would be observed. He expressed Russia’s readiness to build an international centre that would offer ‘nuclear fuel cycle services, including (uranium) enrichment under the control of the IAEA.’ He said that the proposed centre would be open to every nation.

Simultaneously, Kiriyenko announced Russia’s intention to restore the nuclear power industry network that existed during the Soviet period. ‘All nuclear power facilities on the territory of Russia, Ukraine and Kazakhstan are part of the single complex of the former Soviet Ministry of Medium Machinery Building, which we need to restore,’ Kiriyenko said. He revealed that Putin had initiated discussions with his Kazakh and Ukrainian counterparts.⁷

The US is making counter-moves for bringing Russia within the fold of an international regime in the development of next-generation nuclear energy systems. Following his visit to Moscow on March 15, the US Secretary of Energy Samuel Bodman extended an invitation to Russia to join the so-called Generation IV International Forum (GIF).⁸ The Russian Federal Agency for Nuclear Power announced, ‘The two sides discussed energy security issues, approaches toward creating mechanisms of non-discriminatory access of new countries to inexpensive nuclear energy under strict adherence to the Nuclear Non-Proliferation Treaty.’

 

Evidently, the US’s energy diplomacy vis-à-vis Russia is moving on multiple tracks, which are interlinked. On the one hand, the US is concerned about Russia’s emergence as the 21st century’s energy superpower. The entire US strategy of preventing Russia from re-emerging as an independent player on the world scene is coming unstuck. The expanding energy cooperation between Russia and European countries could incrementally erode the raison d’etre of the trans-Atlantic alliance itself – and, America’s leadership of the alliance.

Again, China and India scrambling for access to energy reserves in various continents is bad enough. But, their growing cooperation with Russia gives an added dimension. Apart from ‘locking in’ energy reserves at a time when the US is poised to hugely increase its own energy imports, any concord between Russia, China and India would have far-reaching strategic import by strengthening multi-polarity in the world order. (Russia also has evinced interest in participating in an Iran-Pakistan-India gas pipeline project, with a potential role for China as well in it.) The US should, therefore, somehow bring China and India (along with the EU countries) on board.

At the same time, with regard to nuclear energy, the US would like to develop a convergence of interests with Russia in optimally exploiting the world market. Russia has a well-developed nuclear industry with high technology that can give the US serious competition in the export of nuclear power plants and nuclear fuel. The US interests are best served by shutting out Russia altogether as a competitor. Since that is too much to hope for, the next best course lies in co-opting Russia into an international regime for nuclear commerce.

 

The lengthening shadows of the multipolar world order greatly alarm the US. Symptomatic of this is the plummeting of Russian-American relations to an all-time low in the past 15 year period. In a recent major article (which hardly received attention in the rarefied intellectual climate in Delhi), Russian Foreign Minister Sergey Lavrov spoke with great frankness on the ‘basic distinctions between the foreign policy philosophy of Moscow and the approaches of some western capitals.’ Lavrov said: ‘Russia does not intend to take the position of a detached onlooker… Russia cannot and will not play the role of a "front-line state" in a new "cold war" …(But) Russia cannot be on the side of a narrow blind-folded view of things… predicated on postulates such as… "those who are not with us are against us"… The increased significance of the energy factor in world politics is on the mind of many. Those who are used to thinking in terms of geopolitics are already assuming that such a development alters the equations of strategic stability… Professionals who are concerned with Russia studies and with policy-making cannot but see that it will be naïve to expect us to be content with a world in which we accept the role of being led.’⁹

 

No less sharp has been the bipartisan Task Force Report released by the influential US think tank, the Council on Foreign Relations (CFR) on March 5 titled ‘Russia’s Wrong Direction: What the United States Can and Should Do.’¹⁰ The report pointed out that 15 years after the break-up of the Soviet Union, ‘US-Russia relations are clearly headed in the wrong direction’; that in the relations between the two powers, ‘contention is crowding out consensus’; and, a strategic partnership ‘no longer seems realistic.’ Interestingly, among the areas of most concern to US interests, the CFR report listed out energy. ‘Russian energy policy has turned a prized asset of economic relations into a potential tool of political intimidation. Officials make no secret of their belief that Russia’s commanding position in world energy markets should help advance its political objectives.’

 

The report criticised the Kremlin’s reassertion of government control over the energy sector, and recommended: ‘The United States cannot expect Russian energy policy to substitute for its own. If America and its allies lack a comprehensive strategy… they will only increase Russia’s ability, and its market position for political purposes… To limit the use of oil and gas exports as an instrument of coercion – and as a prop for authoritarianism – the US needs to agree with other governments, especially our European allies, on measures to assure that state-controlled Russian companies act like true commercial entities.’

The CFR report acknowledged that nuclear energy forms an area where ‘cooperation (with Russia) can bring important benefits’ to the US. In this regard, it identified that the ‘challenge for American policy in the future’ will be to ‘design and implement policies that serve our interests’ no matter the overall climate of Russian-American relations. Thus, US should strive for a general framework of cooperation on civil nuclear energy issues – ‘a so-called "123 agreement" (required by Section 123 of the US Atomic Energy Act).’

The report said, ‘A "123 agreement" will allow expanded cooperation in many fronts – including the Bush administration’s own Global Nuclear Energy Partnership Initiative. Such cooperation would reflect Russia’s status as a major factor in nuclear commerce, from fuel supply and storage to reactor sales and advanced research. With such an agreement in place, Russia and the US can plan and then implement long-term arrangements for spent-fuel storage, which would be a critical component of secure fuel-supply arrangements that can persuade countries to forgo their own enrichment and reprocessing facilities… US-Russian cooperation should extend to third countries.’

 

To sum up, the US’s energy diplomacy lies at the core of Russian-American relations. Commentators and experts on both sides are already openly speaking about the commencement of a new ‘cold war’ between the two powers. Media reports from Washington highlight that a major review of the US policies towards Russia is currently under way. Commentators have compared the CFR report to Winston Churchill’s Fulton speech, which was made exactly 50 years back to the day on 5 March 1946, and remained a symbolic event of the Cold War!¹¹

The Kremlin’s contribution thus far has been largely reactive. The establishment of American and NATO military power ever closer to Russia’s borders; US’s insistence that Russia has no legitimate national interests outside its own territory or even legitimate sovereignty in its own internal political and economic affairs; double standards on a range of issues such as terrorism, democracy and human rights, foreign aid and military bases – all these are cuts and thrusts of the US policy of containment of Russia.¹²

The well-known scholar on Russia, Stephen Cohen recently warned, ‘If this new chapter of the Cold War continues to unfold, it may be the most dangerous one ever, for several reasons. Its geopolitical focus has moved from Central Europe to the very centre of Russia’s traditional zone of security, its "near abroad", in a growing and exceedingly provocative military encirclement… Indeed, Washington’s ‘winner-takes-it-all’ policy towards post-Soviet Russia is significantly more aggressive than was its approach to Communist Russia… There is an equally grave psychological factor: this chapter of the Cold War is undeclared, unfolding at least until recently, behind a facade of pseudo-"partnership and friendship".’¹³

 

These stark realities of international politics can be overlooked only at the cost of seriously compromising India’s long-term interests. From the US perspective, the nuclear deal with India constitutes a vital springboard in its global strategies in the 21st century. It aims at pinning India down on the US geopolitical drawing board, which is important for Washington’s strategy at this critical juncture in international politics, given India’s maverick record of fraternity with the Soviet Union in the past. The scope of the nuclear deal with India by far exceeds the parameters of a mere ‘strategic partnership’. (The US has ‘strategic partnerships’ with most countries in the world today, including Russia).

Washington’s disfavour of Russia’s readiness to supply nuclear fuel for Tarapur should be an eye-opener. Asked whether Russia was surprised at the US attitude over the Tarapur fuel issue, the visiting Russian Prime Minister Mikhail Fradkov told the media in Delhi on March 16, ‘The sale of uranium is in the interest of both the countries (Russia and India).’

 

Footnotes:

1. Analysis: Russia’s Nuclear Ambitions Heating Up, Radio Liberty/Radio Free Europe, 9 March 2006.

2. Anatoly Belyaev, President Putin advocates energy dialogue with all world powers, RIA Novosti, 14 March 2006.

3. Russia as an ‘Energy Superpower’, Russia Profile, 25 November 2005.

4. Javier Solana, ‘Why Europe Must Act Collectively on Energy’, The Financial Times, 8 March 2006.

5. See http://europa.eu.int:8082/comm/ energy/green-paper-energy/index_en.htm

6. See Stephen Blank, ‘Russia Realises its Cartel’, Central Asia-Caucasus Analyst, 30 November 2005; Sergei Blagov, ‘Deal With Turkmenistan Enhances Russia’s Energy Position in Central Asia’, EurasiaNet, 24 January 2006.

7. Russia Aiming to Restore Soviet-Era Nuclear Complex, RIA Novosti, 12 January 2006.

8. The GIF is an 11-member nuclear energy research and development consortium established in January 2000 to develop innovative nuclear energy system concepts to meet future energy challenges. GIF members include Argentina, Brazil, Canada, Euratom, France, Japan, South Korea, South Africa, Switzerland, United Kingdom, and the US, with the OECD-Nuclear Energy Agency and the International Atomic Energy Agency as permanent observers.

9. Sergey Lavrov, Russia in Global Politics, Moskovkiye Novosti, 3 March 2006.

10. See http://www.cfr.org/ content/publications/attachments/Russia_TaskForce.pdf

11. Sergey Lavrov, ‘Sixty Years of Fulton: Lessons of the Cold War and Our Time’, Rossiskaya Gazeta, 6 March 2006.

12. The US policy framework aimed at preventing post-Soviet Russia’s emergence as an independent player on the world stage has remained remarkably consistent through the Clinton administration as well. See The Russia Hand: A Memoir of Presidential Diplomacy by Strobe Talbott, Random House, New York, 2002.

13. Stephen Cohen, Did the Cold War Really End. Remarks for the Cold War conference at Gorbachev Foundation in Moscow on 1 March 2006. SFC1@nyu.edu