India’s Expanded Choices Dilute Once-Privileged Ties With Russia

India’s Expanded Choices Dilute Once-Privileged Ties With Russia

Russian President Vladimir Putin’s deferral in late-October of a planned visit to India, now scheduled to take place in late-December, encapsulates a bilateral relationship buffeted by shifting global geo-economics but still lucrative for both parties. The postponement reflects the fact that euphemisms such as “strategic partnership” do not automatically translate into preferential treatment in commercial matters in a world increasingly driven by interests over ideology and history.

A number of unresolved issues had built up on both sides that precluded the possibility of a successful summit meeting. Topping the list is New Delhi’s decision to bring any additional Russian-built reactors at the Kudankulam site in south India -- beyond the first two presently under construction -- online under the ambit of India’s controversial 2010 civil nuclear liability law. The Russians have argued that all future reactors at the site should be grandfathered in under the two sides’ 1988 intergovernmental agreement, which has no provision for a right of recourse by the operator in the event of an accident due to faulty components sold by a vendor. India’s new nuclear liability law makes the supplier liable in such cases. According to the Russians, the increased liability will significantly increase the price of follow-on units and lead to a review of the export-credit mechanism Moscow extended for the initial reactors.

However, with post-Fukushima protests at the site already delaying the commissioning of the first two Kudankulam reactors, the Indian government cannot afford to be seen as weak on nuclear safety by a domestic audience that is already skeptical of its governance abilities. New Delhi must also balance terms for Russia with those on offer to competing American and French suppliers, who are also chafing under the new liability framework. Combined, this has frustrated Russia’s efforts to extract favorable treatment as reciprocation for having engaged India in nuclear trade at a time when nobody else would.

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