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Global Risk Insights

Global Risk Insights

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Three Things To Know About The India-Australia Uranium Deal

Three Things To Know About The India-Australia Uranium Deal

India And Australia Nuclear Deal

On Friday August 5, India and Australia concluded an important energy deal that will seek to address looming issues facing both countries. The formalization of the agreement marks the conclusion of bilateral talks dating back two years and will offer enormous benefits to both India and Australia.

1. India is actively seeking to address energy shortfalls

India has a stated goal of raising its nuclear energy capacity to 63,000 MW by 2032 by adding $85 billion worth of reactors. Nuclear power, while controversial in some areas, is critical to India’s economic growth plan as it works to reduce paralyzing power shortages hindering growth, foreign investment and productivity.

While the recent election of Narendra Modi provoked concerns about the new BJP governments’ nuclear policies, this agreement dates back two years under former Prime Minister Manmohan Singh’s United Progressive Alliance government. It is largely a reflection of India’s tremendous energy shortfalls and the necessity to address them. Coming on the heels of other agreements with France and Russia, this deal illustrates that India is doing just that.

Related: Supreme Court Ruling Deals Blow To Indian Coal Sector

In addition to increasing uranium to India, the agreement will also increase sales of coal and natural gas to the South Asian nation. This follows a recent decision by the Australian government to develop a coal and rail project in Queensland.

With some Indian power stations down to only a week’s worth supply of coal, increased sales from Australia are a necessity for a country that remains famously coal reliant. But with plans to address the endemic energy poverty in the country hinging largely on nuclear power, the uranium is the most important aspect of the deal and one which illustrates that Modi is actively seeking to address India’s manifold energy problems. Whether this will successfully translate into implementation and be followed with the necessary and properly allocated investments to modernize the energy sector remains to be seen.

2. Further legitimization of India’s status as a nuclear power

India is the first country to buy Australian uranium that was not a signatory to the Nuclear Nonproliferation Treaty. The country shocked many experts when after two decades of attempts; it successfully tested a nuclear bomb in 1998, heightening regional tensions and global fears over war with neighboring nuclear power Pakistan. The event caused strains with a Clinton administration attempting to work on nonproliferation and avoiding war on the subcontinent (which did in fact erupt less than a year later with the Kargil conflict).

Relations between the U.S. and India did receive a significant boost as the Bush Administration worked fervently to engage the country culminating in the 2008 Civil Nuclear Agreement, which accepted the reality of the country’s nuclear power status while providing important safeguards, proving a high water mark for relations between the two nations.

While the country has received uranium from 11 other countries including Russia, France, and Kazakhstan, a long-term deal with a country from the established western liberal order will further work to confer legitimacy as the world continues to adjust to a nuclear India.

3. Australia benefits from diversified trade patterns

Australia has the world’s third largest uranium reserves and thus has plenty of it to part with. The country can quite easily afford to become the long-term supplier of uranium that India will need to meet its ever-growing energy needs. What Australia doesn’t have much of is trade with India.

Related: Here's A New Update in India's Gold Saga

While working to help further develop the uranium mining industry in western Australia, this agreement will benefit relations between the two nations and to diversify Australia’s trade. At present, Australia has only $15 billion in annual trade with India. This amount looks particularly paltry when compared to the $150 billion in annual trade that the land down under has with China. With a growing population of middle class consumers, trade with India can be increasingly important to Australia’s economy in the future.

As questions mount regarding Sino-Australian relations in the future, the opportunity to have a stable democracy (and in particular a country that doesn’t punish its enemies with unofficial trade sanctions) as a growing trade partner looks increasingly attractive to the government of Tony Abbott. This deal may serve to open the lucrative markets of trade with India while providing both a better relationship and greater trade security for Australia.

The agreement reached between India and Australia will have important benefits to both nations. If successfully implemented, it may help India tremendously in addressing critical energy issues over the long-term while enhancing its growing legitimacy as a nuclear power and shoring up Australia’s economic security. From a geopolitical perspective, it could significantly advance bilateral relations between two nations of increasing import to the global order.

By Sean Durns

(Source: www.globalriskinsights.com)

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  • Diva on October 01 2014 said:
    In order to carry out the destructive and aggressive intentions and dreams of India to be filled, the newly elected government since coming into power have been observed to be much possessed with its nuclear credentials. For making its hunger satisfied it is being acting as a rolling ball in between the international cooperating members mainly includes, USA, Japan, Russia and now Australia which once have denied to supply India with nuclear fuel on the issue of liability law and also its non signatory status of NPT...Country's energy demands can also be fulfilled by adopting other several modes of generating power such as col, hydel, thermal and solar.
  • Mehaas on October 01 2014 said:
    If India is experiencing such energy shortfall which can only addressed by nuclear than why not India signed NPT. India openly asked for many nuclear benefits in shape of cooperation from all sides than why not it makes itself legitimize so all obstacles can be removed. Australia India nuclear deal is nothing than mere a matter of mutual national interests by paying no heed to global norms of proliferation.
  • waqsa on October 01 2014 said:
    Author forgot to mention that this deal would have catastrophic impact on South Asian peace and stability. We will see more nuclear weapons in coming years in India.
  • Aditya on October 01 2014 said:
    The dangers of the selling uranium to India obviously relate to the India-Pakistan rivalry, which has descended into war many times in the last half century. Both countries have nuclear weapons, so this decision will no doubt aggravate the India-Pakistan tensions. But PM of Australia clearly has put “business” ahead of “politics” this month - with his pushing the US-Australia free trade arrangement and agreeing to allow U.S. Marines to permanently be stationed in Darwin, as these decisions are welcomed by big business and defense contractors. The Australian public apparently does not have a voice in questioning these moves
  • Sidharth Sankar on October 01 2014 said:
    The author states: "The country shocked many experts when after two decades of attempts; it successfully tested a nuclear bomb in 1998".

    Misleading! India tested an atomic device in the 1970s (I believe it was 1972). To state that India tested it in 1998, after "two decades of _ATTEMPTS_", is misleading.

    The author is over-analyzing the situation. Australia exports commodities. China is the main buyer. China is cooling. So, Australia needs another big buyer of commodities. NPT (or, whatever) be damned!

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