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Mainstream, Vol. XLVIII, No 33, August 7, 2010

Nuclear Fuel and Emerging Dynamics of Indo-Kazakh Relations

Monday 9 August 2010, by Deepti Srivastava

The bond of friendliness between India and Kazakhstan as prominent members of their respective regions as well as the comity of world nations has gained a new fillip in recent times. Kazakhstan’s rise as an independent nation-state was a significant event in international affairs, and it was readily accorded recognition by India. This led to a formal beginning of relations between India and Kazakhstan. Now the two countries have been exploring various diversified fields of cooperation for strengthening their ever vibrant bond of friendship. Of late, cooperation in nuclear fuel has become a vital area of interaction between India and Kazakhstan. If adjudged in the traditional frame of relations, the two countries accord great emphasis on the mutuality of their concerns. This manifests in a high level of activity at the political level reflected in the close political cooperation. For instance, Indian Vice-President Mohammad Hamid Ansari’s visit to Kazakhstan in late 2008 was followed by Nursultan Nazarbayev, the President of Kazakhstan, being the chief guest at India’s 60th Republic Day parade in 2009. It was Nazarbayev’s fourth consecutive visit to India, and it yielded five important agreements/MoUs, including cooperation in civil nuclear energy, space research, hydrocarbons and a legislation covering an extradition treaty, a protocol on accession of Kazakhstan to the WTO (World Trade Organisation) and a commitment to fight against global and regional terrorism and religious extremism. However, the recent surge in activity of engaging each other through politics is to help facilitate cooperation in other areas.

New Imperatives of Engagement

ALL the Central Asian republics are important for India due to their geo-strategic location, political and economic potential, including other equally important factors; but Kazakhstan holds a special place for it. Being the largest republic among the Central Asian states, potentially the largest producer of crude oil and uranium in the world by 2015 and as the fastest growing economy in Central Asia, Kazakhstan has acquired a strategically important place in India’s foreign policy too. Besides, its geo-strategic location between China and Russia and the high priority being accorded to it by the US in the War on Terror campaign in the wake of the 9/11 terrorist attacks have resulted in Kazakhstan’s growing importance for India. Kazakhstan’s enormous economic potential, especially its energy (oil and uranium) resources, is believed to be the most desired area where India has focused to consolidate its ties. Being an energy deficient country, India depends on the import of oil, mainly from the Persian Gulf region. But to enhance its energy security, India looks at alternative sources. In terms of oil, Kazakhstan has been recognised as the “second Kuwait” and the next “petro-state”, whereas in the production of uranium Kazakhstan emerged as the largest country in December 2009.1

Kazakhstan, in recent times, has surged from the 13th ranking in the former USSR to the top five most dynamic economies in Asia. It has maintained its GDP growth of more than nine per cent during the last six years. In 2008, it was around 9.5 per cent. It is realised that all these positive trends on different fronts can only be sustained if Kazakhstan diversifies its relations with countries within or outside the region including the emerging powers of the world. India is one among them. Also, India’s growing economic, commercial and technological performance has paved the way for Kazakhstan to establish close relations with India. But, as stated above, Kazakhstan’s energy sector has tremendous potential to accelerate the overall Indo-Kazakh relations by lending a big impetus to them. That is why India’s focus lies in getting more involved in the energy sector in Kazakhstan.

After the Indo-US nuclear deal (2005), which was finally ratified in August 2008, the path to Kazakhstan-India nuclear cooperation has opened up. Being the largest producer of the uranium ore, overtaking Canada and Australia, and the second largest country in terms of uranium deposits—1.5 million tonnes, which constitute approximately 16 per cent of the world total—Kazakhstan has a great prospect to help India in fulfilling its energy needs and in turn to enhance its energy security. It is to be noted that in 2008, the 45-nation Nuclear Suppliers Group (NSG) lifted a 34-year old ban on New Delhi and paved the way to its joining the international nuclear trade. Now India is having civil nuclear deals with other countries also, namely: Argentina, France, Kazakhstan, Mongolia, Namibia, Russia apart from the United States and in this way it is bridging the 33-year gap of nuclear isolation. Recently, Canada has joined the group of seven countries already having civil nuclear deals with India. Now there are no significant stumbling blocks before India and Kazakhstan that could hinder further collaboration in the nuclear issue.2 Even in the January 2009 deal, India and Kazakhstan have highlighted that the cooperation in the field of civil nuclear energy is the most important agreement.

India’s Energy Quest and Emerging Dynamics of Indo-Kazakh Relations

IN the current perspective, it has been recognised that the major objective of India’s foreign policy is to secure its energy interest. At present, India imports over 70 per cent of its petroleum requirements. Currently, India is fulfilling most of its oil requirements from the unstable Persian Gulf. To overcome its dependence on the Persian Gulf, India needs to diversify its sources of oil import. For India, the most attractive oil domain outside the Persian Gulf is the Caspian Basin. In view of this, India has begun befriending the region’s key countries and accelerated its efforts to gain a strong foothold in those countries; but, as analysts argue, it all depends on how India forges to build meaningful relationships with them.

India’s energy purchases are now officially being guided by foreign policy objectives. The government has set up an institutional mechanism in the form of a Group of Ministers (GoM) to conduct and promote structured energy dialogues with energy-rich countries such as Kazakhstan. The mechanism is part of the Integrated Energy Policy (IEP) approved by the Union Cabinet, which visualises India’s growth process being hit due to growing dependence on energy imports that exposes it to external price shocks. The IEP envisages exploiting domestic resources to the maximum, but also emphasises the need to cut international supply risks through several unprecedented strategic diplomatic initiatives. This includes building a strategic stockpile of nuclear fuel to counter the risk of disruption of international fuel supply.3

So far as the status of India’s nuclear fuel is concerned, the uranium reserve is estimated to be some 78,000 tonnes—around 0.8 per cent of the world’s reserves. This limited reserve can only support to produce 10,000MW of electricity. However, out of India’s installed power generation capacity of 140,000MW, nuclear energy accounts for only 4120MW. Surprisingly, the country has 17 reactors, operating at 46 per cent capacity, which is less than half of the total demand, because of a shortage of uranium. As stated above, this underutilisation will end very soon, as the clearance of the NSG will enable India to get nuclear fuel from various countries under proper safeguard pacts; India is due to receive its first uranium imports in three decades from France and Canada shortly.

The new deal on nuclear fuel between India and Kazakhstan has opened up new avenues of cooperation. The benefits lie on both sides. India’s quest of energy security through clean energy sources and Kazakhstan’s quest of the strategic market, coupled with certain other factors converge on the thrust to open up for each other. If India’s NPCIL plans to create a generating capacity of 3160MW by using nuclear fuel by 2012, to achieve 20,000MW of installed nuclear power capacity by 2020 and to build 250,000MW nuclear capacity by 2050 to meet the country’s power requirements, without full-fledged engagement with Kazakhstan there would be a remote possibility of accomplishing this ambitious plan.4 Apart from the abundance of hydro-carbons in Kazakhstan, it has also emerged as a major energy player in the field of uranium though, as stated above, Kazakhstan secures the second position in terms of uranium reserves in the world. If the previous years’ production is taken into account, Kazakhstan produced 5279 tonnes of uranium in 2006, which was 21 per cent higher than in 2005. In 2007, this increased to 6937 tonnes, registering a 31 per cent increase. In a recent development, Kazakhstan’s Energy and Mineral Resources Ministry estimates that Kazakhstan is now the world’s biggest uranium miner, leaving behind Australia and Canada. Kazakhstan mined 13,500 metric tonnes of uranium as of December 21 2009, whereas Canada and Australia produced 9934 and 8022 metric tonnes of uranium respectively, and these three countries account for more than half of the global uranium production.5 In Kazakhstan, the state-owned company Kazatomprom plans to mine up to 30,000 tonnes of uranium by the end of 2018. All these projections indicate that Kazakhstan will be among the top international energy players in the global uranium market.6 With this, as Richard Lockhart, a senior editor at Energo, a weekly publication of the Edinburgh-based energy analysis group, rightly predicts, Kazakhstan will become the world’s largest uranium exporter.7

But there exist problems also. Kazakhstan lacks the enrichment technology. This constitutes a major hurdle in harnessing its full potential of uranium production. This compels Kazakhstan to be still dependent on Russian infrastructure. But Kazakhstan is now readily opening itself up and diversifying its connections to take the fullest advantage of its available potential. The move is evident from the attempt to attract major powers such as regional and extra- regional players, including the US, Russia, the European Union, China, and India in the field of enrichment cooperation. In this scenario, Kazakhstan has signed some important agreements with these major countries recently.8 Kazakhstan and the US came close on this issue with government-to-government cooperation, and Kazatomprom, which is a nuclear company, has conducted business with private US companies; for example, in 2008, it has signed a memorandum of cooperation with the US General Electric (GE) on nuclear power and uranium processing, including mining9 whereas Kazakhstan and Russia have renewed their thrust through energy diplomacy. Russia still retains its sturdy interests in mining Kazakhstan’s uranium, which is evident from the joint ventures of Zarechnoye and Budennovsk. However, Russia is concerned more in saving Kazakhstan’s hydrocarbon reserves than moving towards those countries that are hostile to its security interests.10

So far as the case of Kazakh-China association on the issue of nuclear cooperation is concerned, it began with the establishment of the Kazakh-Chinese Committee for Cooperation in 2004. This relationship gained further impetus when both the countries established a cooperative arrangement on the joint development of uranium resources, production of nuclear fuel, the long-term trade of natural uranium, nuclear power generation, and construction of nuclear power plants. In 2006, Kazatomprom and the China Guangdong Nuclear Power Group (CGNPC) signed their first strategic cooperation agreement, and then expanded it. In 2007, the two countries signed a trilateral deal to jointly mine uranium deposits in Kazakhstan with the China Guangdong Nuclear Power Group (CGNPC) and China National Nuclear Corporation. In the same year, both countries also signed an agreement in Beijing to extend their cooperative projects for a long term period envisioning large supply of uranium fuel to China by Kazakhstan including CGNPC investment in two Kazakh uranium mines: Irkol and Semizbai.11 These apart, some foreign companies have invested in Kazakhstan’s uranium industry such Canada’s SXR Uranium One, Japan’s Marubeni Corporation, Britain’s New Power Systems Limited and the US uranium trading company, Nukem.12 Not only that, the world’s leading producer of uranium oxide, Canada’s Cameco, has a 60-per cent share in Kazakhstan’s Inkai uranium mining operation.

Given the fact that some of the strategic rivals are getting closer to Kazakhstan, India is desperately trying to take advantage of the meaningful opportunities unveiled by virtue of being an “extended neighbour” of Kazakhstan. Identifying geo-political, economic and geo-strategic interests, including great power rivalry, India has signed important agreements to secure its interests in Kazakhstan. In this scenario, under a specific accord, Kazakhstan will begin to export at least 120 tonnes annually of Kazakhstan’s uranium to the NPCIL (Nuclear Power Corporation of India Ltd.), including joint exploration of uranium in Kazakhstan and construction of nuclear power plants in the near future. While it is worth mentioning that Kazatomprom, a leading nuclear company of Kazakhastan, wanted a comprehensive nuclear agreement with India, India wished to leverage its agreement with Kazatomprom not only to source uranium but also to use the Kazakhstan company’s 10 per cent stake in Westinghouse Electric Corporation to tap the nuclear power generation technology as well.13 After the permission of the Nuclear Suppliers Group (NSG) in September 2008, foreign nuclear power firms are eyeing Indian orders potentially worth $14 billion (Rs 68,460 crores). In this connection, as explained by Moukhtar Dzhakishev, the Indo-Kazakh nuclear agreement has great importance. He observed: “The signed MoU reflects the interest of the two countries in joint cooperation on a wide variety of nuclear energy subjects, including mining for natural uranium, deliveries of Kazakh natural uranium products for Indian nuclear industry, and personnel training.”14

As per the Indo-Kazakh nuclear agreement, Kazakhstan will supply uranium to India under terms and conditions that would be discussed and decided later. But it is remarkable that both countries have decided to formulate a comprehensive agreement at a later stage for cooperation in the civil nuclear energy area. This pact will ensure the smooth running of India’s atomic plants. According to the deal, Kazakhstan has shown keen interest in purchasing atomic reactors from India in the near future. Kazakhstan also invited India in mining uranium in its territory and offered to provide the necessary expertise as well. Besides uranium supply, the agreement will also include joint exploration of nuclear fuel and construction of more atomic plants.

An Appraisal of the Deal

IT is worth mentioning that the Indo-Kazakh civil nuclear agreement would certainly strengthen bilateral ties and cooperation between the two countries. For India, being an energy-deficient country, it is a big step forward towards achieving the targets for generating nearly 30,000 MW of nuclear power by 2020 and 250,000MW nuclear capacity by 2050. On the other hand, having huge reserves of energy (oil and uranium), Kazakhstan, with the cooperation of India, would be able to remove some hindrances which lie in its nuclear field due to lack of nuclear technology and skilled labour in the mining sector; these obstacles make Kazakhstan weak in harnessing its full potential. Morever, Kazakhstan also needs heavy investment for its energy fields and India could be considered as a big investor along with a huge market for Kazakhstan’s energy sector. Therefore, this pact will expand the scope of business and political cooperation based on mutual assistance and would help to begin a new chapter of strategic partnership in their bilateral relationship.

However, the close cooperation enjoyed by the two countries could not be seen as obstruction-free. There are certain issues which have been identified as barriers in developing India’s relations with Kazakhstan. One of the major obstacles in their relations is the absence of a direct means of transportation between South Asia and Central Asia. For instance, P. Stobdan feels that “economic growth in the Asian region and emerging opportunities for inter-regional trade are creating demand for viable transport connectivity, land-linking arrangements and important transit services. This holds true for India and Kazakhstan also.” Another problem which slows down Indo-Kazakh relations is great power rivalry. This has continued in Central Asia since 1991 due to its geo-strategic location and energy resources. In this great game of securing energy resources, it is important to notice that India is facing tough competition not only from China but also from the USA. Terrorism, drugs and arms trafficking have also become a major problem for India and Kazakhstan and started hampering the relations between the two.

Finally, it would be right to assert that the relations between the two giant states of Central Asia and South Asia have tremendous potential but this has to be realised. The pace is slow but the prospect is bright. The bilateral cooperation can yield credible results if Kazakhstan and India are able to overcome the obstacles. So far as transport connectivity is concerned, this can be achieved by reviving and restoring the legendary Silk Route. Some new routes can also be considered which could directly connect India, China and Central Asia as suggested by Professor Stobdan. Here Kazakhstan can play a key role in developing this route into a reality. The reason simply is that Kazakhstan has good relations with both China as well as India.15 This would further improve the chances of increasing cooperation between South Asia, Central Asia and China, keeping India at the centre.

There are some other areas where India and Kazakhstan can cooperate with each other and by harnessing their full potential they can strengthen their mutual ties. Past instances indicate that India may benefit from Kazakhstan’s global and regional presence. Kazakhstan has backed India’s claim for a permanent UN Security Council seat, supported India’s NSG waiver at Vienna and persuaded India to be a member of the CICA (Conference of International and Confidence Building Measures in Asia). Kazakhstan is also going to chair in 2010 the 56-nation Organisation for Security and Cooperation in Europe (OSCE) and the OIC (Organisation of Islamic Countries) in 2011.16 This would naturally provide India a friend to carry its message, particularly to the OIC, about some of the challenges it is grappling with.

ENDNOTES

1. See: http://www.miningmx.com/news/energy/Kazakhstan-world’s-largest-uranium-producer.htm. And Sudha Mahalingam, “India and Kazakhstan: Building Energy Bridges”, in K. Santhanam, Kurlay Baizakova and Ramakant Dwivedi (eds.), India-Kazakhstan Perspectives: Regional and International Interactions, New Delhi: Anamaya Publication, 2007.

2. India and Kazakhstan: Impetus Needed in Relationship. Available at http://thefiltercofee.wordpress.com/2009/01/21/ india-and-kazakhstan-impetus-needed-in-relationship

3. Ashok Dixit, Kazakh President’s visit to India likely to focus on energy and food security. Available at http:// www.thaindian.com/ newsportal/kazakh-president-visit-to-india-focus-on-energy-and-food-security

4. India to ink nuclear deal with Kazakhstan by month end. Available at http: //www.livemint.com/2009/01/11235839/india-to-ink-nuclear-deal-with

5. Canada and Kazakhstan agree nuclear cooperation. Available at http//www.financialpost.com/storey.html

6. John C.K. Dally, Analysis: Kazakhstan’s Nuclear Future. Available at http:// www.upi.com/science news/resource wars/2007/08/14/analysis-kazakhstan-nuclear-future.

7. Linton Levy, Kazakhstan and India ink Nuclear Fuel Agreement. Available at http://nuclearstreet.com/blogs/nuclear power news/archive/2009/01/27/kazakhstan-and-india-ink-nuclear-fuel-agreement.aspx.

8. Kazakhstan: Opening Up for Nuclear Collaboration. Available at http://www.fas.org/nuke/guide/kazakhstan/osc 100609.pdf

9. Ibid.

10. Ibid.

11. China and Kazakhstan Sign Cooperation Agreements, World Nuclear News. Available at http://www.world-nuclear-news.org/ENF-China_and_Kazakhstan_sign_ cooperation_agreements-0411084.html

12. John C.K. Dally, Analysis: Kazakhstan’s Nuclear Future. Available at http:// www.upi.com/science news/resource wars/2007/08/14/analysis-kazakhstan-nuclear-future

13. P. Stobdan, “India and Kazakhstan should Share Complementry Objectives”, Strategic Analysis, Vol. 33, No. 1, 2009, pp. 1-7

14. Kazakhstan and India sign nuclear cooperation accord. Available at http://www.world-nuclear-news.org/newsarticle. aspx?id=24507

15. Zakir Hussain, India and Kazakhstan: New Ways Ahead. Available at http://www.idsa.in/event

16. Arun Mohanty, Sumant Swain, (eds.), Contemporary Kazakhstan: The Way Ahead, New Delhi: Axis Publications, 2009.

The author is an Assistant Professor (ad-hoc), University of Delhi and a Ph.D scholar, Centre for Russian and Central Asian Studies, School of International Studies, Jawaharlal Nehru University, New Delhi.

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