Obama-Modi talks high on optics, many pacts not signed

Negotiations over the India-United States nuclear deal continued until “Air Force One landed in Delhi” carrying President Barack Obama. According to sources, the nuclear deal and other agreements announced during Mr. Obama’s visit to India for Republic Day were being finalised right down to the moment his plane touched down. “It was a good thing we were connected over the e-mail right through his flight, or we may not have been able to wrap things up in time,” said a source aware of the negotiations.

One week after the visit, details are slowly emerging about the agreements that were announced between Prime Minister Narendra Modi and President Barack Obama after bilateral talks in Delhi. What seems clear is that while the talks were high on optics, and on optimism, there were several differences between India and the U.S. that prevented many deals announced from actually being signed, which is partly why President Obama referred to a “breakthrough understanding,” rather than just a “breakthrough.”

The nuclear deal, for example, was “hammered out” after officials in the nuclear contact group extended their negotiations in London right up to January 22. It consisted of an agreement on two separate issues: that of liability for U.S. suppliers in case of a nuclear incident, and administrative arrangements, or U.S. tracking requirements of fissile materials and equipment used in the reactors.

On liability, India offered to transfer the liability, capped at Rs. 1500 crore to an insurance pool created by state-owned insurers and the government. Indian officials have also clarified that Section 46 of the liability act, that relates to tort or civil suits, will not be applicable to American suppliers. U.S. officials were given a presentation that included “a mixture of case law, official assurances and reading of the regulations,” that eventually convinced them. For the first time, India also agreed to “offer data and annual consultations” on nuclear material, that could raise questions for the NDA government. However, the administrative arrangements are yet to be signed, and will await a “memorandum” assuring India’s stand on the liability law (Civil Nuclear Liability Damages Act, 2010), which still needs to be cleared by the U.S.

On the defence front, sources said the 10-year defence strategic partnership framework has yet to be signed, but that the “language has been frozen” for this. There is no confirmation when the agreement will be inked, but sources say it could wait for the confirmation of the new Defence Secretary Ash Carter, who has been a prime mover on Indo-U.S. defence relations.

Another sticking point between officials came over the selection of co-development, co-production projects to be announced under the DTTI (Defence and Technological Trade Initiative). While the U.S. presented 17 proposals, Indian officials felt they didn’t represent “high-end” technology transfers, and came up with their own list of six proposals. However, the final four agreed to, including one for “Raven” drones, didn’t belong to the group requested by India. “We need to walk before we can run,” said sources, pointing out that India is yet to sign three key foundational agreements. “So we chose the agreements that could be easily done, given U.S. requirements on end-use monitoring, etc.”

India and the U.S. also hope to complete the negotiations over finance agreements as well as agreements to cooperate on counter-terror measures that didn’t get cleared during the visit. While the agreement on the Foreign Account Tax Compliance Act (FATCA) could be signed next week when U.S. Treasury Secretary Jack Lew lands in Delhi, other agreements on curtailing terror, financing and counterfeit operations have not yet been finalised.

Eventually, officials on both sides agree that most of the differences were bridged only because of “political commitment” and the final push from both Prime Minister Modi and President Obama to announce the agreements, many of which will still have to be wrapped up in the upcoming weeks, if not months.