Countdown to Zero Dollars

The U.S. opened the door to nuclear trade with India -- and got nothing.

NEW DELHI — It was supposed to signal a new era of strategic and economic cooperation between India and the United States, but four years after a ground-breaking nuclear deal between the two countries, frustrated American companies are wondering what happened to all the lucrative deals that were supposed to come their way. And Pakistan, which tends to view India's every move on the global chess board as a zero-sum game, has registered its unhappiness by ramping up its capacity to produce weapons-grade plutonium with two new Chinese-supplied reactors.

The deal, known as the U.S.-India Civil Nuclear Agreement, ended a 34-year embargo on the transfer of nuclear technology to India, paving the way for U.S. manufacturers and suppliers to sell reactors and fuel to India, even though it is one of the four nuclear weapons states that are not party to the Nuclear Non-Proliferation Treaty, or NPT. (Pakistan, Israel, and North Korea are the other three.)

Giving India this exemption did not sit well with the non-proliferation community -- it still doesn't -- but heavy lobbying by the U.S. nuclear industry helped the Bush administration push the deal through Congress.

Thus far, however, the results have disappointed the Americans.

"It's no secret...that the U.S.-India Civil Nuclear Agreement hasn't met U.S. commercial expectations due to the nuclear liability law passed by the Indian Parliament, which essentially shuts out U.S. companies," said Rep. Steve Chabot (R-OH), chairman of the House Foreign Affairs Subcommittee on South Asia at a hearing in May. That's putting it mildly. Of the $150 billion jackpot that was supposed to be in play, U.S. firms have not yet earned a dime.

Hillary Clinton traveled to New Delhi the same month as the hearing, to nudge the process along. A few weeks later in Washington, standing beside her Indian counterpart, she announced the first modest piece of good news: Westinghouse, whose headquarters are in Pennsylvania but which is owned by the Japanese conglomerate Toshiba, had concluded what is called an "early works agreement" to begin preliminary negotiations on site development and licensing issues for a proposed 1,000-megawatt reactor in the western state of Gujarat. But this is far from a done deal and it could be years before an actual contract is signed. "An agreement has to be reached on the liability law before we do anything," said Scott Shaw, a spokesman for Westinghouse.

Meanwhile France's Areva and Russia's Rosatom have been doing a very profitable business in India -- thanks to the doors opened by the U.S. government's 2008 deal. Areva has already signed a $9.3 billion preliminary agreement to build two  reactors, the first of six that are planned. The deal could eventually be worth about $20 billion to the French company.

Although frustration within the U.S. nuclear industry is palpable, the official line is that it's still early. "It would be beyond expectations to have business on the ground at this time," said Daniel Lipman, director of strategic supplier programs for the Nuclear Energy Institute in Washington.

The biggest problem for American companies trying to do business in India, as Rep. Chabot noted, is a severe liability law adopted by India's parliament shortly after the nuclear deal was signed. Mindful of the Bhopal catastrophe -- the 1984 industrial chemical accident that killed 3,000 almost instantly and up to another 20,000 over time -- Indian lawmakers insisted that not only plant operators but also suppliers and manufacturers be held liable in the event of a similar catastrophe. This is seen as much less of a burden for state-owned companies like Areva and Rosotom than it is for private sector U.S. companies and their insurers.

Raja Mohan, an analyst at the Observer Research Foundation in New Delhi, describes the liability laws as "ridiculously hard" and blames the Indian government for mismanaging the legislative process, but he also notes that the government is rethinking the entire question of nuclear energy in the wake of Japan's Fukushima reactor disaster, and that India as a whole, with its booming economy and growing middle class, has a changed outlook. "Having a nuclear reactor in your backyard is not popular here either," he said.

Indian officials are inclined to shrug at corporate America's frustration. "When we began to negotiate, it was never about business. Both sides were looking at it in a much larger strategic sense," said Shyam Saran, who was India's Foreign Secretary at the time. "The agreement reflects a certain strategic convergence between the U.S. and India. A deal would not have been possible without this convergence. Even if we are not allies, we have similar concerns and attitudes regarding the emergence of China-not as a threat, but as a challenge. Like it or not, we both have to deal with it."

The nonproliferation lobby in the United States and elsewhere has never been comfortable with the deal, which gives India access to sensitive technology and allows it to buy nuclear fuel on the international market without binding it to the rigorous safeguards and restrictions of the NPT. Under the terms of the deal, India has agreed to open all of its civil nuclear facilities to inspection by the International Atomic Energy Agency -- which proponents say is an important step forward -- but India's military nuclear facilities remain closed to IAEA inspection.

Pakistan, which views India and its nuclear arsenal as a constant existential threat, is deeply disturbed by the preferential treatment given to India. "It creates a new category of nuclear weapons state -- one with all the benefits of the NPT, but with no safeguards on weapons," said Maria Sultan, director of the South Asian Strategic Stability Institute, an Islamabad think tank.

Before the agreement, India had to choose: it could use its limited domestic supplies of uranium for energy or for bombs. Now, with access to the international marketplace, it can have both.

Pakistan responded to the U.S.-India agreement by signing a deal with China for the construction of two more plutonium reactors. One is currently undergoing trials and the other is scheduled to come on line by 2016. Pakistan already has two plutonium reactors built by China, the only country willing to supply it with nuclear technology.

Boosting strategic ties with India by offering it nuclear technology may have looked like a win-win idea at the time, but thus far the payoff to the U.S. nuclear industry has not materialized and the headache of dealing with Pakistan's burgeoning nuclear arsenal is getting worse.

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Budget-Waving Contest

Romney's ridiculous fight about who's got the bigger military doesn't worry Obama. But should it?

Like pretty much every political junkie, I enjoy a good campaign advertisement. So this past week, when Barack Obama's campaign launched its new ad, "Worried," I quickly checked it out on YouTube.

It begins with a rather boilerplate attack on the Bush years, "You watched and worried; two wars; tax cuts for millionaires; debt piled up; and now we face a choice."

It's a pretty standard opening -- consistent with Team Obama's political message of portraying a vote for Mitt Romney as a vote for returning to the policies of the George W. Bush years.

What comes next is more surprising: "Mitt Romney's plan: a new $250,000 tax cut for millionaires; increased military spending; adding trillions to the deficit." Whoa. Wait a minute. Did Obama just attack Romney for wanting to spend more on defense? Um, yes he did -- and that sound you heard was the proverbial needle scratching the record. The last time a Democrat hit a Republican for spending more money on the armed forces was … well, it's been a while.

Indeed, presidential politics for about six decades has turned defense spending into a test of presidential manhood -- how much you want to spend on the military is shorthand for how much you love America and how "strong" you're willing to be in defense of it. In 1972, George McGovern talked about a 37 percent haircut for the military and got pilloried for it by Richard Nixon. In 1984, Ronald Reagan used the metaphor of a Soviet bear to warn against Democratic spending cuts for the military. And in 1988, Republicans ran this devastating ad against Michael Dukakis detailing all the myriad weapons systems he opposed -- interspersed with embarrassing pictures of him in a tank.

Even through the 1990s and after the Cold War had ended, Republicans were using the same sort of appeals. Here's George H.W. Bush in his acceptance speech at the 1992 Republican convention: "In the seventies, they wanted a hollow army. We wanted a strong fighting force. In the eighties, they wanted a nuclear freeze, and we insisted on peace through strength." Eight years later, his son George W. Bush, who often spoke of a foreign policy of humility, took a similar approach: "We have seen a steady erosion of American power and an unsteady exercise of American influence. Our military is low on parts, pay, and morale. If called on by the commander in chief today, two entire divisions of the Army would have to report, 'Not ready for duty, sir.'"

Of course, after the 9/11 attacks, the connection between defense spending and protecting Americans was made even more directly. And, once again, this presidential cycle Romney is running around accusing the administration of "wholesale reductions in the nation's military capacity." Yet not only is Obama seemingly unconcerned about such a charge; he appears to be embracing it. So what's going on here?

For starters, as William Saletan recently pointed out in Slate, defense spending isn't really all that popular. Recent polling shows a consistent level of support among voters for spending reductions to the Pentagon budget -- and a preference for seeing the Pentagon get hit by the budget ax rather than Medicare, Medicaid, Social Security, or education programs.

Indeed, according to a recent poll done this year by the Center for Public integrity, the Program for Public Consultation, and the Stimson Center that looked at specific areas of military spending, Americans support an average total cut to the Pentagon budget of $103 billion -- a larger reduction than the $55 billion in annual cuts currently supposed to go into effect at the end of the year under sequestration. Moreover, two-thirds of Republicans and 90 percent of Democrats were fine with immediate cuts to the defense budget.

But these results shouldn't come as a huge surprise -- the general public has long believed that the United States is far too profligate when it comes to supporting its armed forces. Gallup has for years been asking Americans whether they think Washington is spending "too little," "too much," or "about the right amount" on the military. During the 1980s, a period when Republicans were hammering Democrats for allegedly wanting to weaken the armed forces, Americans overwhelmingly believed the United States was spending "too much" versus "too little" on defense appropriations. Even since 2003, Americans largely have held the same view. Today, 41 percent of Americans believe the United States spends "too much"; 24 percent "too little"; and the rest "about the right amount."

Of course, the problem here is that defense spending is never really about defense spending; it's a synecdoche for the commitment to keeping America safe from foreign danger. Few Americans could tell you the benefits of one weapons system over another or what level of Pentagon spending is most appropriate or why the United States even needs a giant military in the first place. Rather, the equation on defense budgets is much simpler: more spending on defense = strong on defense; less spending on defense = weak on defense. These are, of course, deeply simplistic definitions, but in a deeply simplistic campaign they can have significant shorthand resonance.

Indeed, as Steven Kull, director of the Program for Public Consultation, pointed out to me, "being opposed to military spending increases is a very safe political position. Saying you support cuts to the Pentagon budget is a riskier position, especially for a Democrat, not because people are not comfortable with cuts, but because by saying it explicitly, one is vulnerable to having that comment embedded in a larger narrative of being a less determined and tough leader." Voters might prefer less defense spending, but it still tends to bring up negative connotations for politicians who say so directly. This likely explains why Obama's "Worried" ad is hitting Romney for wanting to spend more on defense rather than bragging about wanting to force the Pentagon to do more with less.

An Obama campaign official I spoke with made a similar point. The official defended the president's record of "keeping America safe" while also blasting Romney for "proposing to explode defense spending in an arbitrary way for political purposes, with no strategic benefit for our nation's security and no way to pay for it." According to Office of Management and Budget projections, a future Romney administration would spend around $800 billion on national defense in 2016, while an Obama administration would spend just less than $600 billion. But forget the $200 billion difference for a second; both numbers are far higher than what's needed to keep America safe. In fact, the cuts that would take place under the much-derided sequestration would simply return the Pentagon budget to fiscal year 2007 spending levels. Still, it's fair to note that Romney wants to go far beyond what Americans want to spend on the military budget.

Nonetheless, not everyone I spoke with was so enamored about Obama's new line of attack. Jeremy Rosner, a Democratic pollster who served in Bill Clinton's National Security Council, said that this entire approach feels like a bit of an "unforced error." According to Rosner, "Obama is well respected on national security; why make an issue out of what is a long-term Democratic vulnerability like defense spending? It's an unnecessary attack line that cuts against one of his core strengths." Indeed, it's hard to quibble with the notion that Obama is unnecessarily playing into one of Romney's key arguments against him.

But there is another element to this discussion. The fact is that public opinion clearly gives Obama a strong advantage on foreign policy and national security issues, so the traditional weakness meme doesn't play the way it traditionally has. Hitting Obama for cutting defense spending, while it might come straight out of the Republican presidential campaign handbook, has far less resonance against an incumbent who killed Osama bin Laden, upped the drone war, successfully prosecuted the conflict in Libya, and has generally been pretty competent on national security.

All this has forced Romney to move further to the right -- not just on Pentagon spending, but in picking fights with enemies and allies alike and rattling sabers against Iran, Russia, and China. It's as if Romney's trying to poke the bear so that he can make the case that he needs some big guns to defend against it. But it doesn't look calculating right now, so much as it does risky. When you throw in Romney's recent gaffe-filled trip to Europe, it has the cumulative effect of making the Republican standard-bearer look impulsive, irresponsible, pugnacious -- even "weak" -- on national security.

Four years ago, the John McCain camp -- as well as Hillary Clinton -- went after Obama for being unprepared for the responsibilities of being commander in chief. It now appears increasingly likely that Obama is preparing to turn the tables and make a similar attack against Romney.

Though, here again, Rosner expressed surprise that the Obama camp is going down this road: "There are plenty of ways to attack Romney for being unprepared on foreign policy. Attacking him for wanting to increase the Pentagon's budget hardly seems like the most fertile area." In fact, it seems strange that right after one of the worst foreign-policy trips by a presidential candidate ever, the Obama camp was running ads about defense spending rather than Romney's overseas misadventure.

Still, rather than being worried about being seen as too weak on national security, Democrats appear confident -- and focused on portraying their opponent as being unprepared and even too "reckless" to do the job effectively.

It's a risky attack line -- and one that opens up political vulnerabilities for Obama -- but it's also an indication that we've entered a strange new world. If it works, we might have to rethink the way Democrats and Republicans talk about national security on the presidential campaign trail.

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