NSSP PHASE TWO: CHARTING THE COURSE

C O N F I D E N T I A L SECTION 01 OF 07 NEW DELHI 007061

SIPDIS

PASS TO NRC

E.O. 12958: DECL: 11/06/2014
TAGS: PARM PREL KNNP ETTC IN NSSP
SUBJECT: NSSP PHASE TWO: CHARTING THE COURSE

REF: A. NEW DELHI 7013


B. NEW DELHI 6500

C. NEW DELHI 6733

D. NEW DELHI 6599

Classified By: DCM Robert O. Blake, Jr., Reasons 1.4 (B,D).


1. (C) Summary: After reviewing achievements made under
Phase One (Ref A),the Next Steps in Strategic Partnership
(NSSP) Implementation Group discussed the way forward on
Phase Two, including legislation, enforcement, outreach, and
training to strengthen export controls; adherence to MCTR and
NSG Guidelines; nuclear safety; space cooperation; and
missile defense. The Indians commented that work is already
well-advanced on issues such as developing a framework for
stronger export controls. Considerable effort, however, must
be sustained to ensure effective implementation such as
introducing legislation that adequately covers "intangible"
technology transfers and provides for "catch-all" controls.
Other issues, such as formulation of an Indian missile
defense doctrine, remain in the beginning stage. The Indian
side agreed to a further discussion of Phase Two issues in
connection with the November 18-19 High-Tech Cooperation
Group (HTCG) meeting. See para 21 for a GOI-drafted list of
issues for follow-up by the GOI and USG. End Summary.


2. (U) A/S Rocca led the USG delegation comprised of
Commerce Deputy Assistant Secretary Borman, DCM, PolCouns,
and representatives from the State Department's Bureaus for
South Asia, Non-Proliferation, and Arms Control, the
Department of Defense, as well as the Science and Customs
offices at Embassy New Delhi. With similarly broad
representation, the GOI delegation was led by MEA Additional
Secretary for International Security Meera Shankar, with

SIPDIS
participation from MEA Joint Secretary (Americas) S.
Jaishankar, other MEA officials from the Americas and
Disarmament Divisions as well as representatives from the
Department of Atomic Energy, Department of Space, and the
Defense Ministry's Defense Research and Development
Organization (DRDO). Because of scheduling constraints, not
all participants were able to attend all sessions.
Participant list follows in para 21.

Ongoing End-User Verification
--------------


3. (C) In the October 21 session of the Implementation Group
meeting, Joint Secretary Jaishankar expressed the GOI desire
to respond in a timely manner to the end-user verification
requests which Commerce U/S Juster gave the GOI on October 11
(Reftel B),but requested better information on the following
issues:

-- Better contact information for the companies, e.g., name
of specific subsidiary, location, etc. (He noted the GOI
used to receive this information regularly in the past);

-- Purchase reference numbers to allow cases to be
cross-checked between the Indian and US sytems;

-- An indicative list of what information the US requires for
post-shipment verification;

-- Information about Indian license requests that have been
denied in order to have a better understanding of what is
acceptable;

-- A contact person for export issues. (Note: New
MEA/Americas Under Secretary Raj Srivastava will be the GOI
POC and Embassy New Delhi expects a DOC export attache to
arrive shortly.)

-- Amendment of the footnote to Commerce's missile catch-all
regulation, citing India's missile program as an entity of
concern.


4. (C) Commerce Deputy Assistant Secretary for Export
Administration Matthew Borman responded that a number of
these requests can be accommodated and some, such as the
request for purchase numbers, will need review. On amending
the missile catch-all footnote, Borman said the amendment has
not yet been published, but said he expected the rule,
including removal of the missile footnote, to be published
the week of October 25.

Phase 2: GOI Steps on Legislation, Enforcement, Outreach,
Training
-------------- -------------- --------------
--------------


5. (C) On strengthening the legislative framework for export
controls, Russell noted that UNSCR 1540 calls on all
countries to adopt the same kind of export control laws and
practices that are outlined in the NSSP. Shankar expressed
confidence in the GOI system of export controls, but stressed
that the resources India devotes to controls for high-tech
goods should be proportional to its trade in that area, which
she described as "infinitesimal." She noted that the GOI has
other government priorities and that steps taken need to be
reasonable given resource constraints. Shankar presented a
non-paper on "India's System of Controls Over Exports of
Dual-Use Materials, Equipment and Technology" (Reftel C).


6. (C) In the October 20 session, Shankar outlined the
ongoing process of strengthening GOI export controls through
legislative, policy, and administrative modifications.
Legislative amendments include revising the Customs and
Finance Acts to make violations punishable by imprisonment.
Shankar offered to share GOI draft legislation, pending
appropriate internal clearances. Policy changes include
mandatory licensing for export, re-export, and transit of all
"Special Chemicals, Organisms, Materials, Equipment and
Technologies" (SCOMET) items, including damaged, defective,
or used items; controls on intangible technology related to
SCOMET items; and a "catch all" provision which affords the
GOI latitude in interpreting which dual-use items may be used
for suspect activities. Administrative controls include
better inter-ministerial coordination through high-level and
working-level groups.


7. (C) As the GOI strengthens export controls, Shankar
relayed private sector concern that new regulations would
obstruct business, not proliferation. Russell noted that all
countries face this concern but offered that governments such
as Hong Kong, which have tightened controls, have found that
high tech trade has flourished, boosted by confidence that
only legitimate businesses would be willing to operate in a
regulated business environment.

Preventive Enforcement
--------------


8. (C) Acknowledging India's basic legal framework governing
export controls, A/S Rocca also suggested four areas in need
of enhanced legislation and enforcement: intangible
technology transfers, brokering, transit and re-export, and
"catch-all" controls. DAS Borman gave the GOI a non-paper
with suggestions for ways to strengthen GOI preventive
enforcement capabilities.


9. (C) Under Secretary for Disarmament and International
Security Affairs Nutan Kapoor listed GOI efforts to enhance
their enforcement capabilities: some pre-license checks on
end-users, risk assessments, post-shipment/installation
verification, and random inspections, all of which may result
in confiscation or other penalties. These measures also
apply to brokering activities of authorized customs house
agents. To prevent the unauthorized transfer of intangible
technology, Indian scientists going abroad for training must
get GOI clearance, as do scholars, while visa applications
for visiting scientists and scholars are subject to
inter-ministerial approval. On re-exports, Kapoor said that
under all circumstances, SCOMET items can only be exported
with a license and that the GOI undertakes pre-license
checks. Finally, training for Customs officials is ongoing.
For example, India and the US have had 16 exchanges of export
control experts since 2000, four in the past year. Russell
underscored the value of EXBS exchanges, and offered to
provide more training as India increases its staffing in this
area. As this is an evolving process, Shankar also suggested
examining best practices from other countries and regimes.

Outreach Initiatives Complicated by Visa Problems
-------------- --------------


10. (C) In the October 20 session, Shankar reported that
relevant GOI departments, including the MEA, are in the
process of conducting outreach to industry and related
associations. She also suggested that industry-to-industry
outreach would be constructive. However, the GOI is awaiting
a response from the USG on several proposals for
industry-to-industry exchanges, according to Jaishankar,
complicated by the "hangover effect" of difficulties Indian
scientists face in obtaining visas. He recalled cases where
individual scientists were granted visas but were then barred
from visiting the labs that had invited them. He said he
spoke to A/S for Consular Affairs Maura Harty about the
matter during her recent visit to New Delhi. "The ongoing
problem of visas poses a serious operational constraint on
what we're trying to do," he said. A/S Rocca assured him
that the US is aware of these problems and is trying to
streamline this process, which requires clearances from
several agencies before a visa is issued.

Adherence to MTCR and NSG Guidelines
--------------


11. (C) An important step required of India in Phase Two is
agreeing to adhere to the MTCR Guidelines and Annex and the
NSG Guidelines, and its associated trigger list and dual-use
list. Russell described the MTCR as a non-treaty political
understanding among 34 states sharing common interests in the
non-proliferation of missiles, rocket and unmanned air
vehicle systems and technology. Other countries can "adhere"
to the MTCR unilaterally without being a member of the
regime, as have Israel and Romania, she said.


12. (C) Drawing from prepared points, Russell went on to
explain that Part 1 of the NSG Guidelines requires that for
transfers of Trigger List items or technology, the recipient
state must have IAEA safeguards on all its nuclear facilities
("full-scope safeguards"). Part 2 of the Guidelines governs
exports of nuclear-related dual-use equipment, technology and
materials. Actual adherence is not required in Phase Two,
but rather, India should provide a firm commitment in Phase
Two to adhere to these regimes in Phase Three. Such a
commitment would be in writing, similar to the policy
statements that India provided in Phase One. Actual
adherence would come in Phase Three, and would involve the
related actions by India in that phase, including:
harmonization of its national control list with the export
control lists of the regimes; and enactment of relevant
legislation to conform to the accepted standard among regime
members and adherents, including on intangible technology
transfers and catch-all.


13. (C) In response, GOI Department of Atomic Energy
representative noted that the India already has stringent
mechanisms in place that are analogous to the NSG guidelines,
such as the Proscribed Equipment List, Proscribed Substances
List, and Radioactive Items List.

US Steps on License Requirements, Nuke Safety, Space, MD
-------------- -------------- --------------


14. (C) DAS Borman listed what the US has committed to do
under Phase Two: Remove license requirements for EAR 999/99
items to all safeguarded facilities in India; expand NRC
dialogue to cover topics in Phase Two; and suggested a
US-India cooperation on satellite development, production,
marketing and operating. Jaishankar asked for a paper
clarifying what removal of EAR 99 license requirements
entails, rather than "having to interpret US law for
ourselves." Removal of EAR 99 license requirements was the
subject of a separate meeting between Borman, NP
representative, and GOI officials (septel).

Request for Flexibility on Nuclear Safety
--------------


15. (C) In the October 20 session, Shankar expressed strong
interest in examining how some US controls can be relaxed in
Phase Two, specifically for NSG controlled safety-related
equipment, perhaps under the NSG safety exemption.
"Flexibility on this would make it easier to demonstrate
progress to our constituency, so that they see that we are
getting something in exchange for revising our laws," she
argued. The Department of Atomic Energy representative
expressed hope that cooperation will be expanded beyond the
nuclear island and include training related to fourth
generation nuclear reactors. Russell noted that the trend in
the NSG has been to strengthen the safety exemption rather
than be more lenient. Jaishankar added that he wanted to
explore training opportunities for Indian scientists in
nuclear safety and hopes to expand the dialogue on this issue
to include the US Department of Energy.

Expanded Cooperation on Civil Space Programs
-------------- --------------


16. (C) On expanding cooperation on civil space programs,
DAS Borman said that Phase Three will involve the signing of
a Space Launch Agreement, similar to that which the US signed
with Russia and Ukraine. Jaishankar expressed interest in
this agreement, which in Phase Three would allow the launch
of US satellites as well as indigenous satellites with US
components. Department of Space representative reaffirmed
GOI intention to revise ISRO's Request for Proposals to
require disclosure of US content and compliance with US
licensing conditions (Reftel D). Responding to ISRO
questions about the US commitment to space cooperation,
PolCouns underscored the end-state we seek for full scope
US-Indian civilian space cooperation, including ability to
launch US satellites and satellites with US components.


17. (C) Demonstrating the societal benefits of India's space
program, Space Department representative said that the GOI
recently initiated a program to link village council members
around the country via satellite and communication equipment
provided by ISRO. ISRO representative also detailed several
pending requests in the area of space cooperation. DAS
Borman suggested the GOI provide a list of the sort of
specific cooperation that ISRO would like to see in Phase Two
as well as a list of the pending requests mentioned.
Finally, when asked when all ISRO subsidiaries would be
removed from the Entity List, Borman responded that such an
issue could not be reviewed until after Phase Three.

Missile Defense
--------------


18. (C) On continuing the missile defense dialogue, in the
October 20 session, Shankar said the GOI will first undertake
an internal exploratory meeting with its agencies.
Responding to the Missile Defense Agency (MDA) proposal (made
at the June 2004 Defense Policy Group meeting) to conduct a
series of planning events leading to a command post exercise
in January 2006, Jaishankar said the GOI agrees with the
proposal and would like to conduct the first planning meeting
in the first quarter of CY 2005. Regarding the US offer to
sell India PAC-2 missile defense capability, Jaishankar said
the GOI wants to "telescope" (combine) briefings on PAC-2 and
PAC-3, so the &right set of people8 can look at the issue
in its entirety. OSD India Country Director Alverson replied
that he would convey the GOI requests to DOD officials in
Washington. Alverson noted that the MDA activities would be
useful to India in helping India determine for itself what
are its missile defense requirements, which should be the
first element of conversation between our experts on the sale
of a missile defense system.

Issues for Follow-up
--------------


19. (C) During the course of the 2-day discussions, the
following issues arose for further follow-up:

For joint action by the USG and GOI:

-- Agreement on date for initial planning meeting with MDA on
missile defense command post exercise;

For action by the GOI:

-- Formal response to U/S Grossman's letter on offer to sell
the PAC-2 system;

-- Copies of draft GOI legislation, laws, and procedures on
export controls and preventive enforcement;

-- GOI paper to clarify pending issues and proposals on space
cooperation; and

-- Formal letter of interest about the Container Security
Initiative (CSI).

For action by the USG:

-- Provide comments on status of GOI list of pending cases of
onward proliferation;

-- Clarification about implications of removing restrictions
on EAR 99 and XX 999 items without licenses for ISRO
subsidiaries;

-- Provide list of items that will be permitted as exports
from the US to India under NSSP Phases One, Two, and Three,
pursuant to EAR amendments;

-- Notification of removal of missile from Commerce,s
missile catch-all regulation;

-- Response to GOI inquiry on specific industry outreach
exchanges;

-- Provide more contact information about companies (contact
name, address, and telephone number) for end-use visits;

-- Provide information about denied license applications;

-- Provide purchase reference numbers for items for which a
license has been approved; (this won,t be feasible,
according to DOC)

-- Provide information on status of Import Certificates under
the 1984 MOU and their continuing relevance;

-- Response to suggestion on harmonizing IAEA Convention on
Nuclear Safety and NSG Guidelines on nuclear safety.
Consider licensing of safety-related items for safeguarded
plants;

-- Response to GOI proposal to expand cooperation on reactor
safety issues in DAE-DOE/NRC format;
-- Provide position paper on adherence steps to NSG and MTCR
Guidelines;

-- Provide information about Russian and Ukrainian Space
Launch Agreements;

-- Respond to request to combine discussion of PAC-2 with
classified briefing on PAC-3;

-- Request to facilitate visas for Indian scientists;

-- Request to provide more detail about information on which
sanctions against Indian scientists Prasad and Surendra are
based;

-- Request to provide information about status of dismantling
AQ Khan network; and

-- Provide updates about changes to the Iran Sanctions Bill.

Upcoming Meetings
--------------


20. (U) The next meetings for follow-up include the High
Tech Cooperation Group (HTCG, November 18-19) in Washington,
the meeting with MDA in the 1st quarter of CY 2005 to begin
planning for the command post exercise, another round of the
Strategic Stability Dialogue (Washington-November),and
another round of Nonproliferation and Security Talks
(Washington-November). The US side urged the Indian team to
come to the November HTCG meeting with papers responding to
papers shared by the US on export control legislation,
preventive enforcement, government-industry outreach, and
space cooperation.

Participants
--------------


21. (U) USG Participants:

State Assistant Secretary for South Asia Christina Rocca
Commerce Deputy Assistant Secretary for Export Administration
Matthew Borman (Oct. 21)
Embassy New Delhi DCM Bob Blake
Embassy Political Counselor Geoffrey Pyatt
Embassy Science Counselor Marco DiCapua (Oct. 21)
Embassy DHS Customs Representative Jim Dozier (Oct. 21)
State Non-Proliferation Bureau Caroline Russell
State Arms Control Bureau Tom McIlvain
State India DeskOff Jim Seevers
Defense, OSD Country Director Jim Alverson (Oct. 21)
Embassy PolMilOff Stacy Gilbert (notetaker)

GOI Participants:

MEA Additional Secretary (International Security) Meera
Shankar (Oct. 20)
MEA Joint Secretary (Americas) S. Jaishankar
MEA Director (Americas) Renu Pall
MEA Director (Disarmament and Int'l Security) Venu Rajamony
(Oct. 20)
MEA Deputy Secretary (Americas) Santosh Jha
MEA Under Secretary (Disarmament and Int'l Security) Nutan
Kapoor
MOD Defense Research and Development Organization, Dr. Anup
Chatterjee
Dept of Atomic Energy, Dr. S.D. Misra
Dept of Atomic Energy, Scientific Officer, Dr. A.B. Awati
Dept of Space, ISRO Director, Dr. Rajeev Lochan
Consultant to MEA, Dr. V. Siddhartha (Oct. 20)


22. (U) A/S Rocca and Commerce DAS Borman cleared this cable.
MULFORD