Event at Carnegie: Nuclear Suppliers in New Zealand

Jul 1, 2010
By Sarah Bulley
Yesterday The Carnegie Endowment for International Peace held an event, “Nuclear Suppliers in New Zealand: Global Trade Rules at the Crossroads.” Mark Hibbs, a senior associate in Carnegie’s Nuclear Policy Program, and George Perkovich, director of the Carnegie Nuclear Policy Program presented a summary of last week’s suppliers group meeting in New Zealand and the potential trade of nuclear reactors between China and Pakistan.
To begin his presentation, Mark Hibbs discussed the new proposed guidelines of enrichment and reprocessing items. The Nuclear Suppliers Group (NSG) has been deliberating new enrichment and reprocessing guidelines since 2004. No consensus was reached last week in New Zealand, primarily because of a disagreement of how to implement future transfer arrangements. Turkey, for instance, objected to the subjectivity of proposed guidelines that would allow some states to deny Turkey nuclear technology transfers because of its geographic placement in the Middle East. The NSG was under added pressure, Hibbs said, to come to an agreement because of the final consensus-based document released at the conclusion of last month’s NPT Review Conference in New York.
The majority of Hibbs’ presentation centered on the non-agenda item of China’s possible export of two nuclear power reactors to Pakistan. At least ten member states asked China to explain and justify its actions. China read a statement outlining the validity of this trade, as it is grandfathered from a trade deal China made with Pakistan before joining the NSG in 2004. China also promised that any trade will be compliant with the NPT and NSG guidelines. It remains vague, however, whether the nuclear trade agreement between China and Pakistan is already a contracted, binding deal.
Mark Hibbs listed four options that he believes China has moving forward:
1.      China could elect to hold off on exporting nuclear reactors to Pakistan indefinitely
2.      China could export the nuclear reactors to Pakistan and assert its right to do so because of the pre-2004 Sino-Pakistan nuclear cooperation agreement
3.      China could export the nuclear reactors after seeking an official exemption from the NSG, citing the exception granted to the U.S. in 2008 to export nuclear reactor technology to India.
4.      China could chose to export the nuclear reactors to Pakistan as a sovereign decision and ignore voluntary NSG guidelines.
There is no current consensus in the NSG about how to proceed with the China-Pakistan deal. The United States opposes grandfathering in the trade agreement and favors China acquiring an exemption. However, other states believe that grandfathering is the “least-damaging option, given the precedent of the U.S.-India deal, potential for Chinese bilateral pressure on individual NSG members, and the likely reaction of NPT parties after the 2010 Revcon oucome.” It seems the panelists believe an exemption is more likely, given that a precedent was set with the 2008 U.S.-India trade agreement.
Specifically, Chinese officials say that the Chinese National Nuclear Cooperation has a contract with the Pakistan Atomic Energy Commission to supply two 320-megawatt pressurized water reactors. China has also agreed to provide Pakistan with loans to cover 80 percent of the project’s total cost of $1.9 billion.
Mark Hibbs also outlined the desperate situation Pakistan faces as it tries to supply energy to its people, one-quarter of whom do not have access to electricity. Pakistan’s energy supply is a national security issue, and played a part in President Musharraf’s removal from office. Pakistan currently generates under 20,000 MW of energy, coming mostly from fuel oil, natural gas, and hydro-electric sources. The nuclear power reactors in place provide just under 3 percent of the country’s current energy output. To meet demand, Pakistani power suppliers are adding up to 1 million new connections to the electricity grid every year, without increasing the capacity to deliver energy. Coupled with these issues is the general “lack of political will” to raise electricity prices, despite rising supply costs. Nuclear energy is a means for Pakistan to relieve some of its energy shortages.
To conclude his presentation, Mark Hibbs stressed that no “conundrum” over the China-Pakistan nuclear trade deal would exist now if there had been no exemption for the 2008 U.S.-India deal. It is difficult for the NSG to universalize adherence to its guidelines, something that it must come to grips with in coming years. He questioned whether now was a time to begin to develop a systematic effort to include NPT outliers, such as India, Pakistan, and Israel in NSG operations and negotiations.
In the question and answer session that followed, both Hibbs and Perkovich elaborated on points brought up by members of the audience. When asked why the U.S. was opposed to grandfathering the deal, Hibbs explained that the U.S. believes the two additional reactors were not part of the original scope of China’s trade deal with Pakistan and therefore not subject to grandfathering. They also said that they future of the NSG was not in jeopardy because of the China-Pakistan agreement. In fact, nuclear commerce accounts for only a fraction of the NSG’s duties. Hibbs believes the deal will encourage states to “push the envelope” of the NPT.
The event was timely and Hibbs and Perkovich provided insightful examinations of the role of the China-Pakistan trade agreement and the Nuclear Suppliers Group.