INDIA S NUCLEAR PROCUREMENT STRATEGY: IMPLICATIONS FOR THE UNITED STATES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83S00854R000200120002-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 22, 2016
• Document Release Date: January 7, 2011
• Sequence Number: 2
• Publication Date: December 1, 1982
• Content Type: REPORT

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Directorate of Secret
Intelligence
the United States
India's Nuclear Procurement
Strategy: Implications for
Secret
NESA 82-10615
December 1982
copy 3 0 8
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Directorate of Secret
Intelligence
India's Nuclear Procurement
Strategy: Implications for
the United States
The author of this paper is
the Office of Near East-South Asia Analysis, with a
contribution by of the Office of
Central Reference. Comments and queries are
welcome and may be addressed to the Chief, South
Asia Division, NESA,
This paper was coordinated with the National
Intelligence Council and the Directorate of
Operations.
Secret
NESA 82-10615
December 1982
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India's Nuclear Procurement
Strategy: Implications for
the United States
India's nuclear procurement activities pose serious challenges to US-Indian
relations, to US relations with nuclear-exporting countries, and to the
global nuclear nonproliferation regime:
? Largely through the use of the international "grey market," India has
been able to maintain a nuclear weapons capability without submitting to
international safeguards or providing peaceful uses assurances. Mainte-
nance of this capability holds all US-Indian relations partly hostage to
nuclear nonproliferation concerns.
? Indian purchasing activities challenge US efforts to work with other
nuclear supplier states for tighter export controls and demonstrate that
the Nuclear Suppliers Guidelines and international safeguards system
have serious weaknesses.
Despite a longstanding effort dating from the early 1960s to achieve
nuclear self-sufficiency, India will increase its dependence on foreign
suppliers for nuclear technology, components, and materials. New Delhi
must rely on external suppliers to rescue its failing civil nuclear power
program. India also needs imported equipment to improve its nuclear
weapons capability in the face of a growing threat from Pakistan.
India has evaded Western supplier-state export and nonproliferation
controls by avoiding government-to-government agreements and not im-
porting complete nuclear facilities. Instead, India has established direct
relations with foreign vendor firms, used intermediaries to disguise the end
use of its purchases, and bought many components piecemeal.
This "grey market" strategy has enabled India to build complete nuclear
facilities, but the highly visible technical and economic failings of the
nuclear program have become a political albatross for the Gandhi
government.
As long as it maintains its grey market procurement network, India will
continue to resist supplier-state demands that it submit to international
safeguards and provide assurances these imports will be put to peaceful
uses.
Secret
Secret
NESA 82-10615
December 1982
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If the nuclear grey market tightens, the pace of India's weapons program
quickens in response to Pakistan's pursuit of a weapons capability, or
India's civil nuclear power program continues to flounder, New Delhi could
turn to the Soviet Union, long a supplier of last resort and eager to increase
nuclear trade with India. Although Moscow requires safeguards on what it
sells, it has not required that India sign the nuclear Non-Proliferation
Treaty or abandon its so-called peaceful nuclear explosions option. Soviet
reactor technology is not compatible with existing Indian plants, and New
Delhi has preferred to avoid a closer relationship with Moscow for political
reasons. New supplies of Soviet heavy water would enable India to
continue diverting indigenous, unsafeguarded heavy water to unsafeguard-
ed research reactors capable of producing weapons-grade plutonium. This
sort of Soviet supply link with India would strain US efforts to cooperate
with the Soviet Union on nonproliferation questions and reduce US
leverage over India's nuclear intentions.
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Secret
India's Nuclear Procurement
Strategy: Implications for
the United States
India's so-called peaceful nuclear explosion in the
Rajasthan desert on 18 May 1974 convinced foreign
suppliers that restrictions on the export of nuclear
materials and technology to India should be tight-
ened. The resulting setback to India's drive for nucle-
ar independence increased its reliance on foreign
nuclear-exporting countries, contributed to a growing
crisis in the civil nuclear power program, and changed
India's approach to developing a weapons option. The
continuing problems in the civil program, combined
with the likelihood that India may soon respond to
Pakistan's pursuit of a weapons capability with its
own weapons program, heightens the risk that New
Delhi will increasingly defy US nonproliferation con-
cerns and that US relations with India and supplier
states will be harmed accordingly.
Indigenization: Developments to 1974
India adopted its nuclear indigenization policy as part
of its overall pursuit of economic and technological
self-sufficiency. According to spokesmen for India's
Department of Atomic Energy, indigenization is de-
fined as the effort to achieve a full nuclear fuel cycle
based on maximum national self-sufficiency in mate-
rials, fuels, equipment, manufacturing, technology,
and advanced research (see figure 3, at back of
report). In the early 1960s India chose to build
Canadian-designed power reactors and all of the
support facilities they would require as the corner-
stone of its indigenization program.'
Prior to its nuclear test in 1974, India instituted a
systematic plan for acquiring all technology needed to
master a nuclear fuel cycle entirely independent of
' The sole exception to this plan was the Tarapur Atomic Power
Station, built solely by General Electric under a bilateral agree-
ment signed with the United States in 1963. According to Homi
Sethna, Chairman of the Indian Atomic Energy Commission,
Tarapur was designed to demonstrate the commercial viability of
foreign suppliers. Atomic Energy Department publi-
cations and the writings of senior nuclear Indian
officials describe the following elements of the plan:
? Hundreds of Indian nuclear scientists went to the
United States, Canada, the United Kingdom, and
Western Europe in the 1950s and 1960s for scientif-
ic and technical training.
? Canada trained Indian personnel in the manufac-
ture and installation of complete reactors, provided
direct assistance to Indian firms making parts for
Canadian-designed reactors, and sold the Indians
much of the special equipment needed for manufac-
turing them.
? India signed agreements with the United States,
Canada, France, and West Germany in the mid-
1960s and early 1970s for the construction of
reactors and heavy water plants.
According to Nuclear India, the monthly publication
of the Atomic Energy Department, by late 1973 India
was rapidly establishing a domestic nuclear power
industry based on the replication of Canadian reactor
technology and supported by foreign-designed and
foreign-built heavy water plants. Almost every issue
pointed to new examples of Indian industry's mastery
of manufacturing techniques for reactor components
and fuel cycle facilities.
Nuclear India also called attention to the Atomic
Energy Department's expanding research facilities.
The Bhabha Atomic Research Center (BARC) ac-
quired impressive laboratories filled with foreign
equipment and instruments. Canada gave BARC the
CIRUS research reactor, asking only that India
pledge to use it for peaceful purposes. CIRUS sup-
plied the plutonium used in the test explosion of 1974.
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Table 1
India's Formal Bilateral Agreements
for Cooperation in Nuclear Energy
Partner Country
Date
Signed
Iran
1982,
1977
Egypt
1981,
1976
Indonesia
1981
Argentina
1980,
1974
1980
Yugoslavia
1979
USSR
1979,
1968,
1973,
1961
Vietnam
1978
Libya
1978
Iraq
1977
Poland
1977
Subject Areas
Joint commission on cooper-
ation, Indian aid in power
plant construction
Fellowships, training, scien-
tific visits, joint research
Unknown
Fellowships, training, scien-
tific research, joint research
Cooperation in all phases of
nuclear energy
Technical exchange
Technical cooperation on
fast reactors, general
cooperation
Fellowships, technical coop-
eration, training
Possible cooperation in sen-
sitive areas, but no evidence
agreement has been
implemented
Scientific visits, training
Information exchanges, fel-
lowships, lease and sale of
equipment and materials
Environmental protection,
reactor construction, medi-
cal applications, food
preservation
The Aftermath of the Rajasthan Test Explosion
Foreign reactions to the nuclear test ended most of the
flow of new nuclear technology to India and forced
India to modify its strategy for establishing a self-
sufficient nuclear industry:
? Canada terminated all nuclear cooperation with
India within two weeks of the blast. Subsequent
Indian-Canadian negotiations to restore ties broke
down in 1975 when India refused to provide assur-
ances that it would accept safeguards on all of its
nuclear facilities and would not explode any more
"peaceful nuclear devices."
Secret
Partner Country
Date
Signed
Subject Areas
Romania
1971
Technical exchange
West Germany
1971
General nuclear cooperation
Czechoslovakia
1966
Technical exchange
Afghanistan
1965
Fellowships, training, joint
research
Belgium
1965
Data exchanges, fellowships,
training, help in planning
nuclear facilities (lapsed)
Canada
1965
General nuclear cooperation
(canceled by Canada)
France
1965
Breeder reactor cooperation
Spain
1965
Breeder reactor cooperation
(lapsed)
United States
1963
Construction and fueling of
Tarapur reactors
Hungary
1961
Technical exchange
Algeria
Unknown
Unknown
Brazil
Unknown
Unknown (probably can-
celed after 1974)
Bangladesh
Unknown
Fellowships, training, scien-
tific visits, joint research
(lapsed) _
Unknown .
Research and technical
exchange
? The United States and West European nuclear
supplier nations declined to sign new formal bilater-
al agreements for cooperation or major agreements
for the transfer of technology. France and West
Germany did allow private and state-owned firms to
complete projects already under construction, and
the United States continued to ship fuel for the
Tarapur reactors while warning India of tighter
nonproliferation controls.
? The United States promoted the Nuclear Suppliers
Guidelines, a set of understandings among the
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United States, the Soviet Union, Japan, and the
major West European nuclear-exporting countries.
The guidelines established a list of exports requiring
safeguards and called for participating countries to
exercise restraint in transfers of enrichment or
reprocessing plants. Members of the suppliers group
applied progressively tighter restrictions on exports
and demanded that consumer states, including In-
dia, provide assurances that nothing transferred
would be used to make nuclear explosive devices.
? Only the Soviet Union failed to restrict its nuclear
offers to India. The Soviet Union has continued to
offer nuclear reactors and reactor technology, nucle-
ar fuel, and heavy water to India, albeit within the
general provisions of the suppliers' guidelines. India,
however, has avoided a closer relationship with
Moscow for political reasons. Soviet technology is
also incompatible with existing Indian nuclear
plants.
The Indian Policy Response
In the wake of what it regarded as a clear threat to its
nuclear independence, India officially reaffirmed the
policy of indigenization in Atomic Energy Depart-
ment publications and in statements to the press,
? Indian Atomic Energy Commission Chairman
Homi Sethna leads the policymaking group that
argues that nuclear self-sufficiency is attainable at
reasonable cost and in a reasonable time. This
faction currently carries the most weight in Indian
nuclear decisionmaking. Reflecting Sethna's views,
the Atomic Energy Department's Annual Report
for 1982 reaffirms the goal of maximum indigeniza-
tion and claims that India has "built a sound
infrastructure which enables it to undertake all
processes involved in the nuclear fuel cycle."
the Atomic Energy Department, which has respon
sibility for building nuclear power reactors, opposes
the indigenization policy. According to the press
he leads a faction
within the department and the Foreign Ministry
that believes India must improve its access to
foreign nuclear technology, components, and mate-
rials. US and Canadian negotiators who have dealt
with Indian officials on nuclear issues)
_]conclude that Foreign Ministry officials
have generally been more willing than senior nucle-
ar officials to make concessions on safeguards and
no-explosives-use assurances in order to assure the
flow of nuclear imports.
? BARC Director Raja Ramanna waivers in his
support of the indigenization policy. He has re-
mained aloof from the dispute with the Atomic
Energy Department.
Although members of the Srinivasan group have
direct responsibility for conducting most Indian
nuclear diplomacy and operational aspects of the
Indian nuclear program, they currently lack the polit-
ical clout of Sethna's faction. Nonetheless, Srinivasan
continues to lead a daring assault on the indigeniza-
tion policy in his statements to the press and in
published articles. In 1978 he told the press that
"lacking indigenous know-how and capital resources,
and also the ability to import know-how, the Atomic
Energy Department fell between two stools: complete
dependence on semiobsolescent US and Canadian
know-how in the short run and the aim to become
self-sufficient in the long run, with no viable bridges
from one to the other." His other public attacks on the
failings of indigenization have been equally scathing.
The New Procurement Program
The Strategy: Working the "Grey Market. " We
believe that India's present strategy for acquiring
nuclear technology and equipment represents a modus
vivendi between the proindigenization faction led by
? M. R. Srinivasan, Sethna's subordinate and the
Chief of the Power Projects Engineering Division of
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Homi N. Sethna Chairman, Atomic Energy Commission; Principal Secretary, Department of
Atomic Energy
Sethna heads India's two most important atomic energy bodies and is the most im-
portant official involved in determining both domestic and foreign nuclear policy.
He seeks complete self-sufficiency for India in the nuclear field and opposes import 25X1
of foreign technology.
Highly intelligent and
forceful, Sethna, 59, is a chemical engineer with an M.S. degree from the
University of Michigan and has eight honorary doctoral degrees.
M. R. Srinivasan Director, Power Projects Engineering Division
Department of Atomic Energy
As head of the most important Atomic Energy Department division after Bharat
Atomic Research Center, Srinivasan automatically commands an important
position. He is responsible for the construction and operation for all of India's
nuclear power plants. A severe public critic of the Indian policy of indigenization
of its nuclear program, he advocates obtaining advanced technology from abroad.
Srinivasan has little or no access to Prime Minister Gandhi. Srinivasan, 52, is a
mechanical engineer with a Ph.D. from McGill University and a member of the
Board of Directors of Bharat Heavy Electricals, Ltd.
Raja Ramanna Director, Bhabha Atomic Research Center (BARC), Department of Atomic Energy;
Secretary, Department of Atomic Energy
Ramanna is highly 25X1
regarded among scientists and the India elite. After Homi Sethna, he is the most
important Atomic Energy Department official, responsible for all research and
development. In his position he can exert substantial influence over Indian nuclear
policy. He appears to waiver in his support for Sethna's indigenization policies.
Reappointed in 1981 as BARC director after a two-year absence, it was a personal
triumph over Sethna.
Sethna and the beleaguered technocrats in the For-
eign Ministry and operating divisions of the Atomic
Energy Department that have M. R. Srinivasan as
their spokesman:
? New Delhi has not signed any new formal bilateral
agreements for cooperation or nuclear trade with
supplier countries in order to avoid having to give
He is 57 and a nuclear physicist with 25X1
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assurances that it will apply safeguards to its facili-
ties or that it will not use its purchases for making
nuclear explosives.
? The Atomic Energy Department has cultivated
procurement channels in the nuclear "grey market"
by establishing direct ties with foreign nuclear
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vendor firms or by using Indian state-owned or
private companies as its representatives in making
nuclear purchases.
The term nuclear "grey market" refers to transac-
tions that do not violate the letter of supplier-state
export controls but appear to violate the spirit of
host-state policy. Such transactions allow the sale
,)f nuclear facilities on a component-by-component
or subsystem-by-subsystem basis that would be
strictly regulated and subject to safeguards and
peaceful uses assurances if transferred under a
single agreement. In practice, states allowing grey
market trade require safeguards on the sale, for
example, of complete power or research reactors or
enrichment plants but do not regulate the sale of
specialized components such as pumps, valves, ves-
sels, control instruments, or machined metal parts.
We believe that Bharat Heavy Electricals, Ltd., a
state-owned electrical equipment manufacturer
originally organized under Atomic Energy Depart-
ment auspices, has played a key role in this process
by purchasing equipment for nuclear plants under
cover of its longstanding nonnuclear procurement
and licensing arrangements with foreign firms. Our
survey of recent transactions shows that vendors'
host governments have not asked India to apply
safeguards or give no-explosives-use assurances in
connection with most such sales.
? India has shifted from efforts to buy complete
nuclear facilities to importing components
In general, nuclear-
exporting countries apply the most stringent export
controls to complete nuclear facilities and to explic-
itly nuclear items and the least stringent controls to
items that are less clearly identifiable as parts of
nuclear facilities unless their end use is considered.
The Results. Our analysis shows that India used
imported components and materials to build the most
sophisticated and critical portions of nearly all of its
reactors and fuel cycle facilities (table 2). The Atomic
Energy Department procured some of this equipment
under contracts signed before 1974 and bought the
balance through the grey market. All Indian power
reactors,' the CIRUS and R-5 research reactors, the
heavy water plants, and most of the Hyderabad
Nuclear Fuel Complex are foreign designed or are
copies of designs supplied prior to India's nuclear test
The Weapons Option: Modest Successes. The Indian
strategy since 1974 for dealing with foreign nuclear
suppliers has served New Delhi's nuclear national
security objectives by assisting in the creation of a
research, development, and limited production com-
plex capable of making nuclear weapons free of any
international obligations.
2 Power reactors: Rajasthan (RAPP I and II)-operating; Madras I
(MAPP I) needs heavy water to be commissioned; and MAPP II
and Narora (NAPP I and II)-under construction. India refers to
its reactors by the first initial of the location and the abbreviation
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Table 2
Indian Acquisitions From Foreign Nuclear Suppliers a
Supplier/Import Research Power Heavy Fuel
Reactors Reactors Water Fabrication
Plants Equipment
and Materials
Complete turn-
key project and
components
(1960-70s)
Possible
Weapons-
Usable Tools,
Equipment
Materials
Heavy
Water
Enriched
Uranium
Indians
sought calci-
um metal and
equipment
(1980s)
Small quanti-
ty (1960s)
None until
1980
Equipment
offered
(1980s)
Fueled re-
search re-
actor
(1960s)
but with-
drew offer
to fuel fast
breeder
test reac-
tor (1970s)
Equipment
(1970-80s);
Indians
sought calci-
um metal
(1980s)
Offered
(1980s)
Indian bid for
calcium metal
rejected
(1980s)
India's sole
supplier since
Offers
(1979-81)
Canada CIRUS-as Design technol- Design, technol- Fuel and techni-
turnkey project; ogy, training, ogy, equipment, cal assistance un-
(1960s) R-5 built manufacturing technical assist- til 1974
as copy by Indi- equipment used ance (1960s)
ans (1980s) for all Indian
heavy water pow-
er reactors (1960-
70s)
France Design, technol- Design, technol- Equipment and
ogy, equipment, ogy, equipment, technical assist-
technical assist- construction and ance offered
ance (1960-70s) engineering serv- (1980s)
ices (1970s)
West Germany Components Design, technol- Technical assist- Zirconium
(1980s); instru- ogy, equipment, ance (1980s) (1970s)
mentation (1980s) construction and
engineering serv-
ices (1980s)
speciality materi-
als (1980s)
Italy Components Possible aid in es- Unspecified aid Equipment
(1980s) tablishing compo- (I960s); construc- (1980s)
nent manufactur- tion and engi-
ing capability neering services;
(1980s); compo- components
nents (1980s) (1980s)
Japan Components Components Components Equipment
(1980s); specialty (1980s); specialty (1970-80s); spe- (1980s); specialty
materials (1980s) materials (1980s) cialty materials materials (1980s)
(1980s)
Technology and Equipment
technical assist- (1970s)
ance for genera- 1976
tors (1970s)
Refused Indian Equipment
bid for zirconium (1970s)
(1980s)
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 Table 2
Indian Acquisitions From Foreign Nuclear Suppliers a (continued)
Supplier/Import Research Power Heavy
Reactors Reactors Water
Plants
Technology, con-
struction, and en-
gineering services
(1970s); compo-
nents (?)
Unsuccessful In-
dian bid (1980s)
Fuel Possible Heavy Enriched
Fabrication Weapons- Water Uranium
Equipment Usable Tools,
and Materials Equipment
Materials
The Civil Power Program: Slipping Schedules and
Declining Public Support. In contrast to the modest
successes in weapons-related projects, our analysis
shows that the procurement strategy used since 1974
has badly disrupted the civil nuclear power program.
We believe that India has failed to create a domestic
nuclear power industry based on an independent
technical capability that can make and deliver nuclear
components on a timely basis to internationally recog-
nized standards of quality. Srinivasan and some of his
subordinates such as K. S. Kati, chief engineer of the
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PPED, have told the Indian press that the Atomic
Energy Department has failed to improve on the
original power reactor technology obtained before
1974. Specifically, they claim that the Department
has been unable to design more economical or larger
power reactors to replace those based on the original
Canadian design. The Indian press has reported that
many department technicians question the ability of
the twin reactor station being built at Narora-an
Indian version of the Canadian design used at
Rajasthan-to withstand the area's frequent severe
earthquakes.
The civil nuclear power program is the target of
increasing public criticism for its failure to deliver
cheap, reliable electricity on a timely basis, for its
frequent failures and expensive repairs, and for its
slipping construction schedule and escalating costs.
gram could soon become totally discredited unless its
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technical, economic, and morale problems are over-
come. Prime Minister Gandhi, in our view, will be
eager to avoid permanent political damage to a
program that has long been a symbol of Indian
science and technology and a source of prestige
among developing countries.
Trends in Relations With Foreign Suppliers
We believe that the persistent difficulties in the civil
nuclear power program and the desire of the nuclear
establishment to maintain and develop its weapons
option explain the increase in India's activity in the
foreign nuclear market since 1974. Our analysis
shows that the volume and composition of India's
imports of nuclear products from Western Europe and
Japan from 1974 to 1980, the last year for which data
on all suppliers are available, reflect this growing
activity (see figure 2).4 During this period the value of
imports increased 25 percent in real terms and repre-
sented tens of millions of dollars. Zirconium metal in
the form of reactor parts and tubes for nuclear fuel
elements was the largest item by value, followed by
other components for nuclear reactors and fuel cycle
facilities. By 1980 Japan had replaced West Germany
as India's largest supplier.'
Highlights of current Indian supply arrangements on
the grey market include:
? Italian firms supplying engineering services for the
Thal heavy water plant, according to an Indian
publication on the nuclear program.
? India negotiating with the French to minimize the
application of safeguards to French-supplied low
enriched-uranium fuel for the Tarapur reactors,
according to the US Embassy in New Delhi. F
information.
The Soviet Union: The Ardent Suitor
While other countries have clamped down on official-
ly sanctioned trade with India since 1974, the Soviet
Union has wooed New Delhi with promises of nuclear
cooperation. Analysis of Soviet-Indian trade agree-
ments shows that, despite Moscow's ardor, India has
limited cooperation with the Soviets to those areas of
the fuel. cycle that would not lead to extensive techno-
logical dependence. These include:
? Technical exchange in breeder reactors.
? Purchases of instrumentation for laboratories at the
Bhabha Atomic Research Center and fuel fabrica-
tion equipment for the Hyderabad nuclear fuel
complex.
? Production of Soviet-designed turbogenerators for
nuclear plants under the direction of Soviet nation-
als in facilities owned by Indian state firms.
? Agreements to buy heavy water to overcome domes-
tic shortages in 1976 and 1980.
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offers of power reactors and associated manufacturing 25X1
technology during Premier Kosygin's visit to New
Delhi in June 1979 and again during Prime Minister
Gandhi's visit to Moscow last September.
the same reasons.6
did not want to introduce a new technology dependent
on foreign fuel supply. The Indian press said that
Gandhi postponed a reply to the most recent offer for
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We believe that Gandhi was also reluctant to con-
clude a major new agreement with Moscow because
of the possible adverse effects on relations with the
United States. Her visit to Washington last July, in
our opinion, demonstrated New Delhi's interest in
6 According to the US Embassy in Moscow, the Soviets offered
pressurized water reactors, which would give India its third reactor
technology. India is building natural uranium-fueled, heavy water
moderated reactors of Canadian design and has two US-designed
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Note: See Annex I for discussion of data compilation methodology.
Note: Canada supplied less than one million US dollars of nuclear
products to India in 1974. By 1979, Canadian supplies were
negligible.
588416 12-82
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easing tensions with the United States over the supply
of fuel for the Tarapur reactors, in promoting greater
US understanding of Indian views on the Pakistani
nuclear weapons program, and in establishing closer
commercial and financial ties. A comprehensive reac-
tor purchase agreement with the Soviet Union would
be inconsistent with the Indian-US understanding
that France supply low enriched uranium for Tarapur.
We believe that India would consider strengthening
its nuclear ties to the Soviet Union if its access to the
grey market in Western Europe and Japan were
threatened, if the pace of the Indian nuclear program
were to accelerate significantly, or if continued failure
in the civil nuclear program increasingly embarrasses
the Gandhi government.
As the outcome of the Gandhi visit to Moscow
indicates, the Sethna group in the nuclear power
establishment is still dominant in its support of indi-
genization. In our view, however, changed interna-
tional conditions or enhanced nuclear program-
related political pressures might reverse the Indian
position. The renewal of the Soviet offer also shows
that an opportunistic Moscow is aware of the pros-
pects for a change in New Delhi's policies and is
willing to be India's supplier of last resort
Outlook
We believe that the growing crisis in the Indian civil
nuclear program, combined with India's desire to
maintain and improve a nuclear weapons option in the
face of a growing threat from Pakistan, will force
India to continue relaxing its indigenization policy by
expanding its imports of nuclear-related materials,
components, and technology. Based on our knowledge
of the shortcomings of the Indian nuclear program 25X1
and India's established foreign procurement network,
we believe that Indian priorities and sources for such
imports will be:
? Consulting and engineering services for heavy water
plants-the key element in reducing India's depend-
ence on foreign suppliers for critical materials.
Given past associations and aid patterns, India most 25X1
likely will turn to Italian and West German compa-
nies for assistance, equipment, and materials. Short-
falls in indigenous heavy water production have
made this need particularly acute.
? Consulting and engineering services for Indian-built
power reactors. The poor operating records of the
Rajasthan reactors are a growing political albatross
for the Indian nuclear program and the Gandhi
government. Foreign consultants have not assisted
with these reactors before, but we believe the failure
of the domestic technical establishment to make
them work will provide a strong incentive to seek
foreign help. The KWU consortium of West Ger-
many, which already has a joint venture relationship
with Bharat Heavy Electricals Limited, is a proba-
ble source of aid because it has built heavy water
power reactors in West Germany and Argentina.
? Continued acquisition of precision equipment and
specialty materials for facilities essential to a possi-
ble nuclear weapons program. We believe that the
Indian nuclear establishment will maintain this
option by updating and enhancing its technical
capabilities. Because of the highly sensitive nature
of many of the items being sought, India will buy
them as opportunity allows.
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We expect New Delhi to continue to resort to the grey
market to avoid safeguards and peaceful-use assur-
ances. Past experience has shown the Indians they can
buy major nuclear facilities piecemeal without trig-
gering foreign export controls or submitting to non-
proliferation requirements.
Implications for the United States
We believe that India's nuclear procurement activities
will adversely affect US-Indian relations, US rela-
tions with key European nuclear supplier countries
and Japan, and US efforts to work with the Soviet
Union on nuclear nonproliferation matters of common
concern
On the bilateral level, India's nuclear procurement
strategy allows New Delhi to continue developing its
nuclear fuel cycle with critical facilities and activities
outside of safeguards, thus maintaining a nuclear
weapons option. A weapons option links all coopera-
tion between the United States and India directly to
nuclear nonproliferation concerns. These concerns,
and a resultant threat to US-Indian relations, may
arise over the next year or so as Pakistan's nuclear
program places growing pressure on India to respond
with a second nuclear test, a nuclear weapons pro-
gram, or even with military action against Pakistan's
nuclear facilities. We believe that India will maintain
its weapons capability and continue related procure-
ment efforts at current levels even if relations with
Pakistan improve
India's nuclear procurement activities pose a direct
challenge to longstanding US efforts to work with
other supplier nations, particularly in Western Europe
and Japan, for tighter export controls. US efforts to
encourage the supplier nations to impose stronger
controls over exports of dual- and multiple-purpose
equipment and components of larger nuclear facilities
have so far had little success. We expect the European
exporting countries and Japan to continue to resist US
efforts to curb their nuclear exports by arguing that
they will be replaced by the Soviets in the Indian
market if they are curtailed.
If the United States does succeed in persuading other
supplier nations to eliminate the export control loop-
hole that makes India's grey market successes possi-
ble, we believe that it would lead to fundamental
disagreements between the United States and India:
? India would be likely to blame the United States if
its domestic nuclear program suffered even more
from a constriction of grey market sales.
? Indian nuclear officials and political leaders would
be likely to point to any US-successes in multilateral
export control as fresh examples of industrialized
nations prolonging dependency of developing na-
tions and denying them legitimate access to
advanced technology.
? India would show even less willingness to maintain
existing international safeguards arrangements on
its facilities or to acquiesce in US efforts to build
international support for safeguards on nuclear fa-
cilities not currently covered.
? The United States might be able to lessen Indian
reaction to tightened export controls by concentrat-
ing on potentially weapons-related equipment and
materials and putting less pressure on acquisitions
for power reactors.
US success in constricting the West European-Japa-
nese grey market could turn India to the Soviet Union
as a nuclear supplier of last resort that, in turn, could
create a US-Soviet disagreement over nonprolifera-
tion questions and reduce US leverage over India's
nuclear directions. The Soviet Union could decide, as
it has in the past, to sell heavy water and possibly
reactors to India under safeguards covering only the
items exported. India would then be able to build new
power reactors more easily but without submitting its
indigenous fuel cycle facilities to safeguards. India
would then be able to shift its indigenous heavy water
into the R-5 reactor and later into the MAPP II
power reactor, which would allow both facilities to
remain free of international safeguards and thus
available to supply plutonium for a future nuclear
weapons program. Soviet supply of heavy water has
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already, in our opinion, stiffened India's resolve to
remain free of more extensive nonproliferation limita-
tions that might otherwise be required as part of its
nuclear trade with Western Europe and Japan. With-
out Soviet heavy water India would have been forced
to choose between delaying commissioning of power
reactors or accepting Western nonproliferation re-
quirements.
Our analysis shows that India's nuclear procurement
activities demonstrate serious weaknesses in the glob-
al nonproliferation regime:
? The Suppliers Guidelines, for example, do not speci-
fy in enough detail the exported items that should
be subject to safeguards in order to restrict Indian
grey market purchases.
? New Delhi's traditional refusal to revise its existing
safeguards agreements will pose a major obstacle to
any US efforts to promote a revision in the stand-
ards for such arrangements to take the technology
replication problem into account. Most international
safeguards agreements do not contain provisions to
cover the extension of safeguards to facilities that
replicate the design and technology of the original
safeguarded facilities. India's agreements leave it
free to copy Canadian reactor designs and heavy
water technology from a number of countries.
? India's success in procuring nuclear equipment and
materials and in maintaining a nuclear weapons
option despite the application of nonproliferation
controls sets an example for other would-be nuclear
proliferation countries
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Appendix A
India's Imports of Nuclear Products-
Methodology for Graphing
Data Selection
The data used to compile the graph on India's nuclear
imports (p. 10) are the values of exports of a select
group of nuclear products to India by its major
European suppliers and Japan, as reported to the
United Nations in Version I of the Standard Interna-
tional Trade Classification (SITC). The 44 product
groups included within the definition of "nuclear
products" contain items that are used predominantly
or exclusively in the construction or operation of
nuclear facilities.
Version II of the SITC separates nuclear and non-
nuclear products more completely than Version I, but
the data were not available for the entire period
covered in this research paper. As a check on the
accuracy of Version I data, we compared figures for
Version I and Version II for 1980, the only year for
which information in both systems is available. F_
Differences in the methodologies of Versions I and II
should be taken into account in interpreting the
graph. In our comparison of the two we found that
Version II reported approximately 5 percent less in
the value of nuclear imports by India than Version I.
Variation between figures for individual exporting
countries was random. We believe that the differences
between figures for the two versions reflect changes in
product definitions and the inclusion of more non-
nuclear trade within the categories used for Version I.
Exporting-country data rather than Indian import
data were selected in the compilation of the graph for
two reasons:
? Indian import data for the period covered in the
research paper were incomplete.
? Use of exporting-country figures reduces uncertain-
ties by allowing comparisons between the nuclear
imports of a number of developing countries
Correction for Inflation
Constant dollar figures' for the graph were compiled
using the United Nations Index of Prices of Devel-
oped-Country Exports of Manufactured Products.
Uncertainties
The trend lines in the graph should be interpreted as
indicators of flows of Indian nuclear imports and
orders of magnitude and not as precise dollar values
because of two major uncertainties:
? The product categories remain broad even after
careful selection so that some nonnuclear trade is
included in the totals.
? No correction has been made for exchange rate
variations, changes in product definitions or nation-
al reporting practices, or possible attempts by ex-
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Appendix B
India's Relations With Major Nuclear
Supplier Countries
France
France's longtime role as a major supplier to India's
nuclear program has declined in recent years because
India will not accept France's safeguards require-
ments. According to our analysis, total French sales of
nuclear products to India declined in constant dollars
from 1974 to 1980; exports of machinery and equip-
ment increased in comparison to exports of materials
more directly identified as nuclear such as zirconium.
Indian-French nuclear relations began through infor-
mal contacts among scientists in the 1950s but
reached their peak prior to the Indian nuclear test.
French nuclear companies built two heavy water
plants under contracts signed in 1969 and 1971. Just
prior to the test, the Indian and French Governments
agreed to build a copy of a French experimental
breeder reactor at Kalpakkam. France was to supply
all critical equipment, technology, training, and tech-
nical assistance. This reactor, which is expected to be
completed in 1985, is to be the centerpiece in India's
long-range nuclear strategy for achieving self-suffi-
ciency in the production of nuclear fuel. In 1975, after
India refused to accept French safeguards conditions
for the sale of high enriched-uranium fuel, a weapons-
usable material for the fueling of the Kalpakkam
reactor, intergovernmental relations all but ended in
the nuclear field.
In November 1982, shortly before the visit of French
President Mitterrand, India and France agreed on the
supply of French fuel for the Tarapur reactors. Pursu-
ant to a US-Indian understanding reached during
Prime Minister Gandhi's visit to Washington, France
consented to replace the United States as fuel vendor.
India initially took a hard line on accepting French
safeguards requirements but compromised, we be-
lieve, because of its dependence on French assistance
with the Kalpakkam reactor and because of a more
general desire to continue developing direct relations
We believe that India is likely to avoid intergovern-
mental agreements with France other than the fuel
agreement for Tarapur, thus avoiding further French
demands for safeguards and assurances of peaceful
West Germany
After Canada cut off all governmental and private
nuclear aid in 1974, West Germany became India's
most important source of nuclear equipment and
technology. India and West Germany signed a gener-
al agreement on cooperation in 1971, but, after the
Indian nuclear test, progressively more stringent Ger-
man export controls and nonproliferation policies all
but ended New Delhi's interest in new formal ar-
rangements. Indian. nuclear energy organizations,
however, have successfully cultivated direct ties with
German industry
25X1
25X1
25X1
We believe that West German nuclear exports to
India from 1974 to 1980 consisted largely of equip-
ment for heavy water plants and some reactor compo- 25X1
nents. Prior to 1974 German firms contracted to build
heavy water plants in India. Our analysis shows that
sales of equipment and components increased even
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though total nuclear exports as measured in constant
dollars failed to grow. Total German sales in constant
dollars declined slightly after 1978, when India re-
fused to accept Bonn's safeguards requirements for
the transfer of compressors designed for use in a
heavy water plant. We believe that this event intensi-
fied the shift of Indian activity from dealings with the
West German Government toward direct contact with
German companies.
We believe that India will continue to rely on German
companies to assist it in building and operating heavy
water plants and in securing reactor components.
India's difficulties in producing a domestic supply of
heavy water provide a particularly strong incentive to
cultivate relations with the German companies that
built the heavy water plants and to seek their-aid for
Italy
Aside from a small research agreement, India and
Italy have never signed a formal bilateral agreement
for cooperation. Our analysis, however, of Italian
exports shows that Italy has become an important
supplier to India for highly specialized components for
nuclear reactors and other fuel cycle facilities. We
expect these supply arrangements to continue. We
believe that the relatively modest dollar volume of
trade reflects India's concentration on purchases of a
limited number of high-value, precision components
direct from Italian manufacturers.
to publications, Italian rm pprovided engi-
neering and construction services in 1981 for the Thal
heavy water plant.
Japan
As with Italy, the lack of a formal bilateral agreement
for cooperation in nuclear energy between India and
Japan has not prevented close nuclear trade ties.
Indian nuclear energy organizations have succeeded
through informal arrangements in acquiring nuclear
reactor components and specialty materials for use in
nuclear facilities from Japanese firms. According to
our analysis of Japanese nuclear exports, sales of
equipment constitute the fastest growing category.
manufacturing contacts of Japanese firms.
The US Embassy in Tokyo has reported that Tokyo
intends to restrict nuclear transactions between Japa-
nese firms and India. It has in a number of instances
prevented Japanese companies from selling equipment
or offering their services as brokers or technical.
consultants. We believe such efforts will restrict the
growth of Japanese nuclear exports to India but will
not prevent Indian authorities from making new
attempts to exploit the multinational business and
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Figure 3
The Indian Nuclear Fuel Cycle
-Present
Future
Fuel element at Hyderabad
Nuclear Fuel Complex
_' Heavy water moderated, Spent fuel
natural uranium power
reactors
Spentfuel
Indigenous heavy water
plants
Research reactors
I Spent fuel
..Indian-built reprocessing Separated plutonium
Stockpile of unsafeguardedi J
plutonium (available to
weapons program- from
unsafeguarded sources)
BARC: fuel element
fabrication
Natural uranium reactors: India's Canadian designed power reactors run on natural uranium
RAPP I and II (safeguarded) moderated by heavy water and thus do not require foreign
MAPP I (complete, not commissioned) enrichment services. Fuel from these reactors can be reprocessed
MAPP II (under construction) to recover plutonium formed during irradiation. The recovered
NAPP I and II (under construction) plutonium could be used to refuel the Tarapur power reactors in
place of enriched uranium, or, more importantly, to start up
breeder reactors that will make more fissile material than they
consume: either additional plutonium from uranium put around
the core, or uranium-233 from thorium put around the core.
-
uranium 233, a reactor fuel
reprocessing plant for
Research reactors
CIRUS-operating
R-5-under construction
(Neither is safeguarded)
Imported low enriched
uranium
Li,'Tarapur reactors
(TAPP I and II)
y.auu -