KAKODKAR GIVES POSITIVE HEARING TO U.S. INDUSTRY

C O N F I D E N T I A L SECTION 01 OF 04 MUMBAI 000134

SIPDIS

SIPDIS

DEPT. OF ENERGY FOR U/S GARMAN, S. JOHNSON, T. CUTLER, A.
SCHEINEMAN
DEPT. OF COMMERCE FOR U/S FRANK LAVIN

E.O. 12958: DECL: 3/9/2017
TAGS: ENRG SENV BEXP EFIN EINV EPET EMIN ETRD PREL
PGOV, IN
SUBJECT: KAKODKAR GIVES POSITIVE HEARING TO U.S. INDUSTRY

REF: 06 MUMBAI 2068

MUMBAI 00000134 001.6 OF 004


CLASSIFIED BY: Michael S. Owen, Consul General, Consulate
General Mumbai, State.
REASON: 1.4 (b),(d)




Summary
--------------


1. (C) DAE Secretary Anil Kakodkar made a strong positive
impression on members of USIBC's nuclear trade delegation during
their March 8 meeting in Mumbai. In a briefing following the
meeting, most delegation members told us that Kakodkar made
compelling arguments to include reprocessing rights in the 123
Agreement. Several delegation members said they expected to
encounter a rigid hardliner ultimately interested in diverting
reprocessed fuel to India's strategic program, and were
surprised by the eloquence and persuasiveness of Kakodkar's
economic, energy security and technical arguments for
reprocessing. They said that his, and India's, views on
reprocessing were still not fully understood and appreciated in
Washington. Some said U.S. business would endeavor to better
educate Congress, and indicated that the U.S. may, at some time,
need to rethink its views on reprocessing rights in the 123
Agreement. GE's Tim Richards was careful not to advocate such a
view, and said he would share a written readout of the meeting
with Congress and the Administration in the coming days.
USIBC's Ted Jones told us that his association sought to avoid a
situation where India agreed to omit reprocessing from the 123
Agreement but subsequently gave all its business to French and
Russian firms that agreed to permit reprocessing. Jones hinted
that GE could use its political clout in Congress to stall any
123 Agreement that would lead to such a scenario. Kakodkar told
GE and Westinghouse that "there was room for everybody" to get
one of India's planned nuclear parks, but acknowledged, for the
first time, that the Jaitapur site in southern Maharashtra would
go to the French. Mission continues to remind our industry
interlocutors of the U.S. policy not to allow reprocessing at
this stage of the negotiations, but Kakodkar has other ideas.
End summary.

Kakodkar: Nuclear Cooperation Pointless Without Reprocessing
Rights
--------------


2. (SBU) The USIBC's delegation of U.S. nuclear companies met
with DAE Secretary Anil Kakodkar on March 8 in Mumbai. After
the meeting the delegation gave us a readout of their
discussions with Kakodkar. The DAE Secretary told the
delegation that civil nuclear cooperation with the U.S. made no
sense for India without reprocessing rights. The July 18th
Joint Statement foresaw "full" civil nuclear cooperation. For
India, full cooperation had to include reprocessing. Hence the
draft 123 agreement put forth by the U.S. was a step backwards
from the Joint Statement and unacceptable, the delegation quoted
Kakodkar as saying.


3. (SBU) Kakodkar used a prepared presentation to explain
India's energy needs, the closed-fuel cycle and the need for
reprocessing (Note: USIBC will share a copy of Kakodkar's
presentation with the USG as soon as it receives it from the
DAE. End note). Kakodkar justified the need for reprocessing
by citing energy security needs and what he said was India's
inability to store unlimited amounts of burnt fuel.


4. (SBU) On energy security, Kakodkar outlined the expected
dramatic growth in energy demand, recounted India's dependence

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on fossil fuel imports, cited what he called the bad experience
with the cutoff of fuel to Tarapur and explained the finite
nature of India's reserves of natural uranium. The closed fuel
cycle and the DAE's three-stage vision were necessary if India
was to meet its growing demand for power and achieve energy
security, he said. One delegation member told us that Kakodkar
said India had about 40 years worth of fuel without resorting to
reprocessed fuel. With reprocessing and a complete three stage
program, Kakodkar purportedly told the delegation, nuclear power
could supply all of India's power needs for the next 500 years.
(Comment: In other discussions, Kakodkar and others from DAE and
the NPCIL have conceded that nuclear power will, at best, supply
up to 25 percent of India's power over the longer term. End
comment). Several members of the delegation told us that
Kakodkar also made convincing technical justifications for the
role of reprocessing in India's plans for a closed-fuel cycle.


5. (SBU) Kakodkar also said that India could not keep storing
spent fuel indefinitely. If reprocessing was not an option,
then India would accept an arrangement whereby the U.S. would
take back any spent fuel, delegation members quoted Kakodkar as
saying. David Sloan of Nukem told us that Russia is prepared to
take back spent fuel from India, but said U.S. industry
acknowledged that such a policy was not an option for the U.S.
Kakodkar said India was prepared to put all facilities that
reprocess foreign-supplied fuel under IAEA safeguards. He
added, however, that this offer did not imply that India would
safeguard all its reprocessing facilities. Kakodkar was vague
on the question of whether India would agree to safeguard the
reactors that ultimately used reprocessed foreign-sourced fuel.

Kakodkar's Arguments Impress Delegation
--------------


6. (C) Kakodkar's presentation and his arguments for
reprocessing made a positive impression on the delegation.
Several of the delegation members told us they expected to meet
a rigid hardliner who was really interested in reprocessing
rights for military reasons. Instead, they found a relaxed and
articulate interlocutor who gave what they said were compelling
arguments for reprocessing on economic, energy security and
technical grounds. Several said that Kakodkar was far more
relaxed and engaging than in his interaction with Commerce U/S
Lavin and a handful of industry reps last year (reftel).


7. (C) Kakodkar, and the broader Indian argument for
reprocessing, may still be widely misunderstood in the U.S., we
heard repeatedly from delegation members. Many observers in the
U.S., including in the Administration, Congress and the media,
still believed that India insisted on reprocessing rights
because it hoped to divert reprocessed fuel to its strategic
program, we were told. Many in Congress, in particular, were
not getting the message that they had heard from Kakodkar in
Mumbai, we heard repeatedly. Several delegation members
indicated that the time may come when the U.S. may need to
rethink its views on reprocessing in the 123 Agreement, and said
that U.S. business must do a better job of explaining India's
views to Congress. Graham Wisner of Patton Boggs, Vijay Sazawal
of U.S. Enrichment Corporation and Phiroze Nagarvala of Bechtel
spoke most openly in this direction.


8. (C) Tim Richards, Director of International Energy Policy at
General Electric, said he would share a readout and analysis of
the group's meeting with Kakodkar for the USG. Richards did not
indicate that he shared the view that the U.S. must rethink its
position, and said his paper would focus on reporting what the
delegation had heard in Mumbai. Ted Jones of USIBC told us that
he saw two worst-case scenarios that his organization would work
to avoid. The first was a 123 Agreement with reprocessing

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rights that was voted down by Congress, and the second was a
situation where India consented to omit reprocessing rights in a
123 Agreement but ultimately did not do business with U.S.
companies, turning instead to countries like Russia and France
that granted reprocessing rights. While overall the USIBC had a
broad agenda to support U.S. business to India, Jones said, the
trade association's civil nuclear working group had clear views
on nuclear cooperation with India: It would support any 123
Agreement that benefits U.S. nuclear companies in their efforts
to do business with India. Conversely, the working group will
not support any 123 Agreement that effectively prevents U.S.
companies from doing business with India, Jones told us openly.
Jones confided his personal opinion that General Electric, while
fully supporting the Administration's efforts to date, could opt
to use "its tremendous political clout in Washington" to stall
Congressional approval on any 123 Agreement that it feared would
effectively bar it from doing business in India while creating
an enabling environment for GE's French and Russian competitors.

Kakodkar Seeks U.S. Industry Support
--------------


9. (C) Jones said Kakodkar approached him after the meeting to
thank USIBC for its role in obtaining Congressional support for
civil nuclear cooperation. He told Jones that USIBC's work "was
not yet done," and he asked USIBC's support "to mitigate the
worst aspects" of the Hyde Act and the Administration's 123
draft. Wisner of Patton Boggs told us he invited Kakodkar to
visit the U.S. to make his views better known in Washington.
Kakodkar was non-committal and avoided a direct response to
Wisner's invitation. Others in the delegation supported the
idea of a Kakodkar visit. Consensus existed that the private
sector, and not the USG, should invite Kakodkar, and that a trip
should include significant interaction with the U.S. scientific
community to ensure that Kakodkar's travel doesn't appear to be
simply a lobbying effort. Wisner speculated that Kakodkar would
probably expect assurances that the USG would issue him a visa.

Nuclear Parks: French Will Get Jaitapur
--------------


10. (SBU) India's plans to bundle foreign reactors in "nuclear
parks" came up in the discussion with Kakodkar and in separate
meetings that GE and Westinghouse had with Kakodkar and the
NPCIL. Kakodkar told both GE and Westinghouse separately that
the DAE's growth plans were so significant "that there was place
for everybody." When asked, neither company said they were sure
whether this meant that both GE and Westinghouse would get their
own park. Kakodkar spoke of four parks in his discussions with
the companies. Kudankulam in Tamil Nadu would go to the
Russians, as had been announced during President Putin's recent
visit to India. Manmohan Bhagat, a consultant for Westinghouse,
said Kakodkar confirmed that the Jaitapur site in southern
Maharashtra would go to the French company Areva. We were
unable to get separate confirmation that this was in fact the
case. (Comment: Until now, the NPCIL insisted that no decision
had been made on Jaitapur, although the French had done previous
work for NPCIL at the site. End comment.) If this were true,
Bhagat said, Westinghouse would focus its efforts on obtaining
the park planned for the Bhavnagar region of Gujarat on a site
on the Orissa coastline. NPCIL Chairman S.K. Jain said the U.S.
companies could help his company get expedited regulatory
approval for new sites if they could offer preliminary work like
that which the French had performed in Jaitapur.

U.S. Industry Can Also Benefit From India's Nuclear Know How
---


11. (SBU) The delegation also gave us a readout of their

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meetings with Indian firms, including Reliance Energy (which
hosted the lunch event where Kakodkar made his presentation) and
Larson and Toubro. Jones said the delegation discovered that
nuclear commerce with India could become a two-way street, with
U.S. industry using India as a platform to support the expected
renaissance of nuclear power in the U.S. Mark Sheehan of the
American Society of Mechanical Engineers (ASME) pointed out that
India still used much of his group's technical standards for its
power plants. India adopted the standards when it imported the
first two Tarapur reactors in the 1960s. One large Indian
supplier of the NPCIL was now applying for ASME certification in
anticipation of marketing its hardware to the U.S. nuclear
industry. Sloan of Nukem said his company envisaged the
establishment of fuel processing facilities in India to supply
both the Indian market and third markets once the enabling
environment is created.

Comment
--------------


12. (C) The openness, and even enthusiasm, for Kakodkar's
arguments was clearly palatable among several members of the
delegation. We continue to remind our industry interlocutors of
the U.S. policy not to allow reprocessing at this stage of the
negotiations, but Kakodkar has other ideas. End comment.


13. (U) Embassy New Delhi cleared this cable.OWEN