China’s Reactor Sale to Pakistan: The Known Unknowns

The announcement of Chinese reactor sale to Pakistan has stirred much frenzy in the Indian as well as in the western media, raising the questions about violations of the export guidelines of the Nuclear Suppliers Group’s (NSG) by China. On the one hand, the Indian Foreign Secretary Mrs. Sujata Singh, while addressing reporters on October 19, 2013 said that China’s plans to build the reactors in Karachi “are a matter of concern for India”; while on the other hand, country’s deputy national security advisor said that, “every country is entitled to progress” and that reactors being supplied to Pakistan are meant for civilian purposes. New Delhi is reported to have, conveyed its objections at both the political and official levels to China, as well as the Nuclear Suppliers Group in the last few months over the proposed sale of two more Chinese nuclear reactors to Pakistan. The contradictory statements by Indian officials may have caused some degree of confusion about the legality and correctness of the proposed Chinese reactor sale to Pakistan in the minds of Indian analysts, who, however, are not alone in such confusion.

The reported offer of China to sell 1000 MWe reactors to China has raised a number of issues to be studied. What are the contours of the “grandfather” exception to fullscope safeguards allowed under Para 4(c) of the NSG Guidelines Part I? Is this sale, as also the earlier contract for 2 additional 340 MWe reactors at Chashma, in violation of NSG Guidelines, in view of China’s admission to NSG in 2004? How far are these nuclear sales by China to Pakistan a reaction either to the July 2005 Indo-US Nuclear deal or the NSG exemption to India of October 2008? What do these sales say about the China-NSG relationship? And finally, is this sale the last of reactor sales by China to Pakistan?

China and NSG

The NSG was formed in 1975 and currently has 46 members. China was the last among P-5 states to join the NSG as a member. In 1993, the first contact of NSG representatives with members of the Chinese delegation in the IAEA General Conference in Vienna was unsuccessful since China did not show any keenness over joining the NSG. At the 1996 Buenos Aires plenary Ambassador Pasi Patokallio informed the NSG members that, “the conclusion from my talks with China is clear: the single major nuclear supplier outside the confines of the NSG is no closer to joining us despite our repeated entreaties. The Chinese position is adamant. I was told in no uncertain terms that China will not apply the full-scope safeguards requirement as a condition of supply”1 At almost every subsequent meeting between China and NSG, held as part of NSG outreach activities, the Chinese response to NSG appeal to China to join NSG, was usually that, “its position concerning nuclear export controls remains the same in that it does not accept IAEA full-scope safeguards as a condition of supply, but that it supports the nuclear non-proliferation.”

However, at the 2000 NSG Plenary, the outgoing NSG Chair reported to NSG members that, during a meeting held as part of NSG outreach activities, “China has informed that its nuclear export policy does actually comply with NSG Guidelines, included the “fullscope safeguards” principle.”2 And that the Chinese were apparently “keen to be informed in the future about NSG activities.”

The repeated pleas by NSG members to China that it joins NSG seem to have had some impact on China. According to the NSG chair, during the 2001 outreach talks, “Regarding the full scope safeguards provision, Ambassador Sha emphasized that this requirement could affect existing and potential future cooperation between China and Pakistan. In the view of our interlocutor, the implementation of the so-called "grandfather clause" could create problems.” Subsequently the following year, according to report by the NSG chair, “China was interested in how the NSG handled existing contracts (the so called grandfather clause), and how it might be interpreted to apply to nuclear cooperation with India. We explained the contents of the grandfather clause, but noted that there were differing views on whether it might apply in particular instances.” This issue of interpretation of the grandfather clause will be discussed later.

Apparently satisfied that it can safeguard its nuclear commerce with Pakistan even after joining NSG, China applied for NSG membership in January 2004. It must be clearly understood that China’s application for joining NSG was at the repeated appeals of NSG and not the other way around. Nothing illustrates this more than the manner in which it announced its adherence to NSG Guidelines. According to NSG rules adopted at the 2001 Aspen Plenary, the Participation procedure required that “If the government concerned has adhered to the Guidelines and is interested in becoming a Participating Government of the NSG, it should indicate its desire to do so to the current NSG Chair directly or through the Point of Contact.” Adherence to NSG Guidelines was “accomplished by sending an official communication to the Director-General of the IAEA stating that the government will act in accordance with the Guidelines. This communication is to be intended for publication in the INFCIRC series.” This was the procedure that had been adopted in case of all new NSG members with the exception of China. When China notified IAEA regarding its export guidelines in January 2004, it merely said that, “the Chinese government has submitted its application for the membership of the NSG. China will, once admitted into NSG, act in accordance with the NSG guidelines (as contained in INFCIRC/254/Part I and Part 2, including Annexes, as amended) and duly exercise export control over nuclear and nuclear dual use items.”3 Unlike the normal practice of NSG procedure wherein a country adhered to NSG Guidelines and then applied for membership, China indicated that it will follow the NSG Guidelines after it is admitted. Nothing shows more clearly the upper hand that China held in matters of its immediate concern. It is, therefore, very unlikely that China, after so clearly expressing over the years its concern over the fullscope safeguards requirement affecting its potential future nuclear cooperation with Pakistan would have agreed at any NSG meeting prior to its admittance that it would cease all future nuclear cooperation with Pakistan without fullscope safeguards.

There is another objective factor to be considered. As mentioned earlier China had expressed an interest in learning how the NSG handled existing contracts (the so called grandfather clause), and how it might be interpreted. The NSG had explained the contents of the grandfather clause, but at the same time noted that there were differing views on whether it might apply in particular instances.

NSG Guideline exceptions

NSG guideline’s requirements of fullscope safeguards does not apply to

1. agreements or contracts predating the NSG's adoption of the full scope safeguards supply condition on April 3, 1992. In case of countries that have adhered to INFCIRC/254/Rev. 1/Part 1 later than April 3, 1992, the policy only applies to agreements (to be) drawn up after their date of adherence;4 or
2. 'exceptional cases' when the transfers are deemed essential for the safe operation of existing facilities and safeguards are applied to those facilities5.

The two exceptions were stated broadly with no guidance on what constitutes “agreements or contracts” or “exceptional cases”.

While a Working Group on Conditions of Supply set up at the 1993 Lucerne Plenary Meeting identified a definition that would restrict the interpretation of “exceptional cases” in a general way, agreeing that this definition should be endorsed by the Plenary as a common understanding and should therefore not be incorporated into the Guidelines, it left “agreements or contracts” undefined.

However even this limited attempt resulted in differing interpretations when the NSG discussed in late 2000 at a special plenary the question of the Russian supply of fuel for Tarapur. This Common Understanding states that, “"exceptional case" are generally understood as those when a transfer of a Trigger List item is deemed to be essential in order to prevent or correct a radiological hazard posing a significant danger to public health and safety and which cannot be realistically met by other means.”

The Russian Federation presented two technical arguments for, for a potential hazard, for making the proposed transfer under the NSG safety exemption. However, some other NSG members felt that the Common Understanding meant cases of "imminent" radiological hazards as opposed to "potential" radiological hazards and NSG safety exemption should not be used when a country without full-scope safeguards is fully capable of averting a potential safety hazard without resorting to outside assistance. Under the NSG rules of procedure this issue could not be resolved and the Russian supply went through.

Now in the case of Chinese nuclear supplies to Pakistan, the two countries had signed an Agreement for Co-operation in the Peaceful Uses of Nuclear Energy, of indefinite duration, on September 15, 1986 and which came into force on November 10, 1986, according to which (i) “the fields of cooperation between the two sides may include the “Design, construction and operation of nuclear research and power reactors and associated facilities” ” (Art. II (f)) and (ii) “The cooperation stipulated under Article II of this Agreement may be effected by “Supply of relevant material and equipment” “(Art.III (f)).

Therefore, considering (i) the equation between China and NSG (already elaborated above); (ii) the China-Pakistan Nuclear cooperation agreement signed prior to China becoming a NSG member; (iii) the undefined “ agreements or contracts” in Para. 4(c) of the NSG Guidelines and (iv) the NSG rules of procedure, the NSG would not be able to- as it could not in the earlier case of Chashma III and IV- reach a consensus decision on the legality/validity of the Chinese contention that the sale of these 1000 MWe reactors to Pakistan would be covered by the NSG Guidelines exceptions, especially when an earlier NSG Chair had explained to China that “there were differing views on whether it (contents of the grandfather clause) might apply in particular instances.” One or more members of the NSG would, of course, strongly contest the Chinese assertion about the validity of the “grandfather” exception to the sale but at the end of the day the sale would go through with no NSG consensus on the matter. It would not, therefore, be surprising if the NSG does not convene any Consultative Group meeting or special plenary to discuss the legality of the Chinese transfers, unlike the special plenary they held to discuss the Russian fuel supply transfer to India in late 2000.

India-US Nuclear Deal and China-Pakistan nuclear transfers

It has been suggested by some analysts that, while post-China NSG membership, the Chinese nuclear transfers may or may not be covered by the NSG exception, the actual driving force behind these sales was the Indo-US nuclear deal which resulted in NSG exemption to India. Tempting as it may be, such arguments are untenable in face of contradictory evidence.

The Indo-US nuclear deal was announced by President Bush and Prime Minister Manmohan Singh during the latter’s official visit to US on July 18, 2005. This agreement between the two countries was one of the most closely guarded secrets of the Bush and Manmohan Singh administrations till its public announcement on July 18. Even senior and key members of the US Congress were not given any inkling of such a deal. The Chinese admission to NSG was made effective June 10, 2004. However, as early as April 10, 2005, well before the USA-India nuclear deal, Pakistani officials had announced that Pakistan and China had reached an agreement whereby Beijing would provide two 300-megawatts-electric-capacity nuclear power reactors to Pakistan in the next ten years.6 These new reactors were in addition to a second plant at the Chashma Nuclear Facility, 280 kilometers (km) southwest of Islamabad, which Beijing committed to build in May 2004, before joining NSG. The agreement was apparently made during the visit of the Chinese Prime Minister Wen Jiabao to Pakistan in early April 2005.7

Corroborative evidence to support this is the admission made by the Pakistan Atomic Energy Commission in one of its documents that “In the context of South Asia, this project will also help to unshackle the Nuclear Supplier Group's embargos on Pakistan in a very short time frame, and prompt other NPP suppliers to follow suit.”8

Hence none of the Chinese nuclear transfers to Pakistan has anything to do with the July, 2005 US-India nuclear deal.

Future Chinese nuclear transfers

The Pakistan Energy Security 2030 outlined in 2005 had included a nuclear capacity target of 8,800 MW by 2030. This target corresponded s to only 5.4% of the installed capacity and about 8% of generation in2030. The original target capacity of 8,800 MW envisaged two 300 MW units, two 600 MW units and seven 1000 MW units.

In 2006 China indicated its inability to supply 600 MW units to Pakistan, due to Intellectual Properly Right (IPR) considerations. However, it offered to supply indigenously designed CNP1000, 1000 MW units to Pakistan. Accordingly the plan was recast to include only 300 MWe and 1000 MWe NPPs (i.e. 6*300 MWe plus 7*1000 MWe NPPs) and a project was approved by the Government for Development of Project Team for Site Development and Installation of 2x300 MWe and 1x1000 MWe Nuclear Power Plants (NPPs) in Karachi. However, that plan seems to have been modified now in light of the offer of China to build 4*1000 MWe (called K-1000) NPPs at Karachi. In addition the PAEC has recently identified two sites for land acquisition and development for NPPs at Ahmadpur East and Muzzafarnagar.

It is quite likely that unless political, scientific and industrial environment, domestic and international, changes substantially China will be the sole source of Pakistan’s civilian NPP program for the foreseeable future and there will be no bar on such cooperation from NSG. The only constraint on such cooperation will be the fiscal constraint on the parties since such transfers will have to be accompanied by financial support from China to Pakistan with full guarantee of fuel supply from its own indigenous source of natural uranium since all major sources of uranium will be barred by NSG Guidelines from supplying Pakistan with uranium.

NSG Exemption for Pakistan?

What are the chances of Pakistan getting a NSG exemption, similar to the exemption granted to India that will enable Pakistan to engage in nuclear commerce with countries other than china? Some analysts in Western Think-Tanks have linked India’s admission in the NSG as a member and granting Pakistan an exemption from NSG waiver to conduct nuclear commerce with other countries. While the idea of NSG exemption to Pakistan remains purely part of academic discourse now, one can examine the ways in which this can happen.

Exemption for Pakistan, for example, can be considered ab initio. Obviously this cannot be for the exemplary non-proliferation record of Pakistan. Nor can it be for reasons of bringing under IAEA safeguards any current or planned significant Pakistan nuclear facility currently not under safeguards under any separation plan similar to that was offered by India. All of Pakistan’s unsafeguarded significant nuclear facilities are military in nature and are unlikely to be placed under IAEA safeguards. It cannot, therefore offer to place under safeguards any nuclear facility unlike India which placed 8 of its unsafeguarded nuclear power reactors to be placed under IAEA safeguards.

Then again NSG exemption for Pakistan can be pushed by China for its acquiescence to India’s NSG membership, since NSG procedural rules require a consensus decision. However this route will be difficult if India does not apply for NSG membership. India is currently not even a NSG adherent under NSG procedural rules. If India does not apply for NSG membership, then it would be difficult for China to advocate an exception for Pakistan on its own merits.

Notwithstanding these factors, exception to Pakistan may yet offer some attractions to NSG members to consider NSG exemption. Firstly, as is well-known, Pakistan is the only holdout state so far in proceeding with any sort of negotiations on Fissile Material Cut-off Treaty at Conference on Disarmament in Geneva. As a result of Pakistan’s intransigence, the Conference on Disarmament is deadlocked even from initiating a program of action on FMCT let alone FMCT negotiations. An exemption similar to the one given to India would require Pakistan to “Continuing its unilateral moratorium on nuclear testing, and its readiness to work with others towards the conclusion of a multilateral Fissile Material Cutoff Treaty.” Readiness on the part of Pakistan to agree to FMCT negotiations was revealed by the Pakistani Ambassador to the CD Zamir Akram in an interview with Arms Control Today (ACT) in October 20119 , when asked “Just to clarify, if Pakistan had an NSG waiver like India, Pakistan would be willing to enter negotiations on an FMCT?”, he answered “yes” and to a subsequent question “Even with ambiguity about the mandate” replied “Yes. I mean, we would like to have a clearer mandate, but with the kind of situation that exists now, I don’t think that is something that is likely to happen.” Given the intense universal desire on the part of the international community to see start of FMCT negotiations, NSG members may feel that an NSG exemption to Pakistan may be in order. There would be some additional incentive on the part of some nuclear supplier member States of NSG for such an exemption. It is now clear that China would engage in further nuclear supplies to Pakistan, irrespective of the sentiments of other NSG members. Under these circumstances, given the closure of the Indian market to foreign nuclear suppliers -especially Russia, France and USA- because of its nuclear liability law, these suppliers may eye the Pakistani market more favourably since it is very likely that Pakistan would enact a civil nuclear liability act in line with international conventions. Therefore, if and when such an exemption to Pakistan is granted, India might find itself in a potentially embarrassing situation. In such a scenario, India would be confronted with situation in which Russian, French and US reactors will be built at East Ahmedpur and Muzzafargarh and other sites in Pakistan instead of Kudankulam, Jaitapur and Mithi Verdi. Of course, it goes without saying that giving such a NSG exemption will be a political decision and a major one that, but stranger things have happened in life!

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

• 1. Report by the Chairman of the Helsinki Plenary on Contacts with Non-member States, Nuclear Suppliers Group Plenary Meeting, Buenos Aires, 22-26 April, 1996.
• 2. “Report by the chair of the Florence Plenary on Outreach Activity”, Paris 23 June, 2000.
• 3. Note Verbale from the Permanent Mission of the People’s Republic of China regarding China’s nuclear policies and practices, INFCIRC/627, 2 February 2004
• 4. GUIDELINES FOR NUCLEAR TRANSFERS, INFCIRC/254/Rev.11/Part 1, Para 4(c)
• 5. Ibid. Para 4(b)
• 6. Bokhari, Farhan, “China and Pakistan in Deal on Reactors,” Financial Times, April 11, 2005.
• 7. Some other evidence suggests that this deal might have been made even earlier. In a statement made in the German Parliament on 16th June 2011, in response to a question about NSG (rough translation) “Does the federal government share the Chinese view that supply [of Chashma-3 and -4] is covered (grandfathered) by a bilateral trade agreement concluded before [sic] China’s entry in the NSG in 2004?”, the reply was “According to the Chinese Government Statement of September 21, 2010 the export of Chashma-3 and -4 to Pakistan is covered by a bilateral agreement with Pakistan made in 2003, before China joined the NSG. According to the NSG Guidelines, therefore, China is not in violation of the NSG Guidelines in exporting Chashma 3 and 4 to Pakistan”
• 8. “Chashma Nuclear Power Project Units -3 and -4 of 300 MWe Each, PC-I Proforma”, Pakistan Atomic Energy Commission., Islamabad
• 9. “The South Asian Nuclear Balance: An Interview with Pakistani Ambassador to the CD Zamir Akram”, Arms Control Today, December 2011.