MENON OUTLINES VIEWS ON CIVIL NUCLEAR NEXT STEPS

C O N F I D E N T I A L SECTION 01 OF 02 NEW DELHI 002906 SIPDIS E.O. 12958: DECL: 11/10/2018 TAGS: PREL PARM KNNP ENRG EFIN IN SUBJECT: MENON OUTLINES VIEWS ON CIVIL NUCLEAR NEXT STEPS AND FINANCE SUMMIT WITH AMBASSADOR REF: NEW DELHI 2816 Classified By: Ambassador David Mulford. Reasons: 1.4(B, D). ¶1. (C) Summary: The Ambassador asked Foreign Secretary Menon in a November 10 meeting about India's timetable for next steps in implementing the civil nuclear agreement. Menon said that a GOI legal review of the draft texts of diplomatic notes that would bring the agreement into force would be finished soon and said that an Indian-IAEA Safeguards Agreement signing was likely by the end of the year. (Note: In a November 12 call to the Ambassador, Menon assured him that lawyers had cleared the text and there was only one more clearance needed.) The Ambassador stressed the importance of fully populating the Safeguards Agreement annex. Menon also discussed the upcoming Financial Summit in Washington, indicating that China and India had not coordinated their approach at the Summit and that India wanted to focus now on confidence-building, not on restructuring the global financial system. End Summary. Exchange of Diplomatic Notes: Soon -------------- ¶2. (C) In an office call that covered other pol-mil subjects (septel),the Ambassador asked Menon for an update on the exchange of diplomatic notes needed to bring the 123 Agreement into force. He stressed that the U.S. saw this as a straightforward exchange of standard language. Menon said that GOI lawyers had been reviewing the texts and he expected a readout from them in the next day or so. (Note: In a November 12 call, Menon assured the Ambassador that the text had been cleared by the lawyers and only one further signature is needed. Menon expects this today. End Note.) Safeguards Agreement: By the End of the Year -------------- ¶3. (C) Turning to the timing of the signing of the Safeguards Agreement with the IAEA, the Ambassador asked how far India had progressed in moving forward to completion, noting in particular U.S. interest in how India intended to populate the Agreement's annex that would specify the facilities covered by the agreement. Menon said that India was still in discussions with the Canadians and IAEA about how existing reactor-specific safeguards on Canadian-supplied safeguarded reactors (CANDU-type reactors in Rajasthan) would be made consistent with the Safeguards Agreement. Menon said that all three parties wanted a seamless transition to the Safeguards Agreement regime. ¶4. (C) Menon said that once that kink was worked out, India intended to bring the reactors identified in the Separation Plan "straight in" under the Safeguards Agreement. The Ambassador flagged for Menon that it was not clear how the GOI was using the word "phasing" in relation to safeguards, pointing out that for purposes of Presidential certification to Congress, it was important for us to understand how India would proceed. Menon said that the discussions with the IAEA regarding the annex to the Agreement would reflect safeguards implementation "in a phased manner" that would take into account those reactors already under safeguards and those reactors that would be placed under safeguards over the next several years. India will "notify" the IAEA of the reactors not currently under safeguards. The Ambassador stressed that it was important that the annex be populated with the entire list of reactors that had been identified in the Separation Plan. Menon said India had originally hoped to finish the process of populating the Safeguards Agreement Annex by the end of November, but that now it looked like it would be by the end of the year. NRC Chairman Klein's Visit -------------- ¶5. (C) The Ambassador encouraged Menon to meet with NRC Chairman Klein during the latter's visit to New Delhi and Mumbai. (Note: Menon is meeting Klein today). The Ambassador stressed the importance of India adopting a nuclear regulatory structure that would allow it to expand the scale of its industry more easily and avoid hamstringing future plans. The Ambassador also noted that there was widespread misunderstanding in India about the capacity of NEW DELHI 00002906 002 OF 002 the U.S. nuclear industry and its productivity and safety record. He said we would be speaking out more about these issues in the coming days. ¶6. (C) Referring to negative perceptions of the U.S. civil nuclear industry, Menon observed that the U.S. faced some "cut throat" competitors in the global nuclear industry. It was important that visitors would be able to explain how the NRC regulates the modern industry, because Indian views were based on thirty-year-old experience with Tarapur. G20 Summit: It's About Confidence-Building -------------- ¶7. (C) Menon noted that India had no "huge expectations" for the upcoming G20 Summit on the financial crisis. India saw the need for the meeting to confront the immediate liquidity crisis and rebuild confidence. Restructuring of the global financial architecture may be needed in the future, but not now. New Delhi definitely did not want a global "Minister of the Economy" to regulate India's economy. Pressed by the Ambassador, Menon said that cooperation between India and China on pending financial issues was possible theoretically, but that contacts with Beijing had been less than satisfactory because of China's unwillingness to actively engage with India. In Menon's views, China was more focused on providing liquidity for Asian/Pacific states as a means to further its influence regionally. MULFORD