RUSSIA - INDIA NUCLEAR COOPERATION - DEPENDENT ON

C O N F I D E N T I A L MOSCOW 002119 SIPDIS E.O. 12958: DECL: 07/23/2018 TAGS: KNNP ENRG PREL PINR ETTC TRGY IN RS SUBJECT: RUSSIA - INDIA NUCLEAR COOPERATION - DEPENDENT ON UPCOMING IAEA AND NSG DECISIONS Classified By: EST Acting Counselor Kristina Kvien for reasons 1.4 (b/d ) Summary -------------- ¶1. (C) Atomstroyexport, Russia's construction firm for nuclear power plants outside of Russia, has agreed to build a total of six nuclear reactor units for India at Kudankulam. Currently, two nuclear reactor units are under construction and four more are planned. The future of the four reactors is in doubt, however, until India resolves issues with the IAEA and the Nuclear Suppliers Group. Experts are divided regarding Russia's future prospects in the Indian nuclear market. End Summary. Russia's Kudankulam Projects -------------- ¶2. (SBU) In November 1988, the Soviet Union signed an agreement with the GOI to build a nuclear power plant with two reactors at Kudankulam, located in the Tamil Nadu state in Southern India. In June 1998, Atomstroyexport signed an addendum to the agreement clarifying its intent to not only build the reactors, but also to supply nuclear fuel and re-export spent fuel back to Russia. The agreement included authorization for a loan of up to $2.6 billion with the stipulation that India would begin repayment one year after both units were in service and complete payment within 14 years. Russia broke ground on the first two VVER-1000 light-water reactors in 2002. The units are not yet in service, due to delays in the delivery of Russian equipment. The first nuclear fuel was delivered by Russia to Kudankulam in early June. ¶3. (SBU) In November 2007, Atomstroyexport signed Letters of Intent with the GOI to build an additional four reactors at Kudankulam. It was reported in the Russian press that preparations were underway to break ground in December 2007 for two of the new units, but Russia put the project on hold when it determined that it could not sign a contract until India resolved its issues with the IAEA and NSG. Natalya Klishina, Deputy Head of the International Department of Rosatom, confirmed this when we met with her earlier this year. She said the deal in its present form cannot go forward until the IAEA approvals and NSG waiver requirements had been achieved. Progress Remains Dependent on IAEA and NSG Decisions -------------- -------------- ¶4. (C) Russia has consistently maintained that IAEA and NSG restrictions do not apply to the first two Kudankulam reactors because they were contracted before the establishment of NSG guidelines in 1992. Atomstroyexport has conceded, however, that it cannot begin work on new reactors until India resolves its remaining issues with the IAEA and the NSG. The GOR is eager to see India resolve these issues, but Aleksey Karpov, Senior Counselor in the MFA's Department of Security and Disarmament Affairs (DVBR) told us that he considers any further progress to be dependent on completion of the U.S.- India 123 agreement. Without it, he said, further development of the Kudankulam complex would have to be reconsidered. ¶5. (C) Both DVBR and Rosatom agree on the steps necessary to clear the way for further Russian nuclear construction in India. These are signing of the U.S.- India 123 agreement, an Indian agreement on IAEA safeguards and Additional Protocol issues, and an NSG waiver for India. DVBR interlocutors have made it clear, however, that although Russia will support India in both the August 1 IAEA Board of Governors (BOG) and subsequent NSG waiver meeting, they do not see this as an easy or certain process. ¶6. (C) DVBR has repeatedly raised concerns regarding outside influence by a US-linked NGO to scuttle the US - India 123 Agreement. They claim that the Arms Control Association, a Washington-based NGO, addressed two letters to NSG members in the last ten months that criticized the proposed NSG waiver and the US 123 agreement. DVBR accuses the Arms Control Association of waging an effective campaign to undermine the U.S. - India 123 Agreement. Russia's Aims in India -------------- ¶7. (C) Leonid Savin, senior expert at the Russian think tank Center for Geopolitical Studies, predicts that unless something changes, Russia will be the dominant force in the Indian nuclear market by 2025. Savin thinks that Russia is not concerned about the signing of the U. S. - India 123 agreement because there are "ways to get around it." He stated that what Russia really wants is "a monopoly" in the Indian nuclear arena. He also added that Russia is trying to gain control of nuclear-related resources throughout the world, especially raw uranium and related metals. He told us that India is an important client and partner for Russia because it has large-scale plans to increase the total capacity of its nuclear power plants to 40 Gigawatts by 2025. ¶8. (C) Dr. Vladimir Evseev, Senior Associate of the Institute for World Economy and International Relations (IMEMO) at the Russian Academy of Sciences was less optimistic about Russia's prospects in India. He does not see a compelling economic benefit for Russia, because unlike some other nuclear markets, India shares no common border with Russia and there are no easy transport corridors. Evseev told us that Russia is not eager for approval of the 123 agreement because it would result in stiff competition from U.S. and French nuclear firms. If the NSG waiver comes through, "it would be hard for Russia to compete in the nuclear market in India". He considers preservation of its conventional weapons market to be more important than nuclear cooperation for Russia at this time. Comment -------------- ¶9. (C) Russia's long-term bilateral relationship with India, coupled with India's fast-growing energy needs, makes it an attractive market for Russia. We can expect Russian support at the IAEA Board of Governors meeting on August 1. RUBIN