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Selling Australian Uranium to India

Prime Minister Tony Abbott is expected to sign a deal in New Delhi on Thursday to sell uranium that will be the single most significant advance in Australia–India relations in decades. The journey to get to this point has been tortuous and the controversy is unlikely to fade anytime soon with regard to the safety, proliferation and waste disposal risks.

Nuclear energy is used by about 30 countries to generate 11% of the world’s electricity, with almost zero greenhouse gas emissions. Currently there are 437 operating reactors and around 70 under construction. Most of the future growth in nuclear energy will be in Asia (China, India, Indonesia, Malaysia, Pakistan, Thailand and Vietnam).

Australia has 31% of the world’s uranium reserves, but its share of the global uranium market is only 12%. The policy framework for uranium export was set by the Fraser Government in the 1970s. The Nuclear Non-Proliferation Treaty (NPT) obligates Australia to facilitate the peaceful uses of nuclear energy. But Australia wanted to be sure that uranium sales would be restricted to countries that could satisfy Canberra, they would not be diverted to non-civilian purposes. For this, recipients had to be in good nonproliferation standing and conclude a bilateral safeguards agreement to account for the use of Australian uranium and any nuclear material produced from it.

Uranium processed at Australian mines must go through three more processes (conversion, enrichment, fuel fabrication) before it can be used in a nuclear reactor. The high energy density of uranium fuel means that a 1,000 MWe nuclear reactor requires 27 tonnes of fresh fuel each year, compared to a coal power station that requires more than 2.5 million tonnes of coal to produce equivalent electricity. There are thus clear environmental benefits of adding nuclear fuel to the portfolio of energy grids. Besides, uranium enriched to between 3-4% for civilian uses cannot be used in a nuclear weapon, which requires enrichment to 80-90%. Thus it is not too difficult to put in place safeguard measures against diversion to non-civilian uses. However, critics respond that this still frees up equivalent uranium from other sources for use in weapons.

The Howard Government had announced in-principle willingness to sell uranium to China, Russia and India. The Rudd Government insisted that recipients had to be party to the NPT. Accordingly, negotiations were successfully concluded with China in 2008 and Russia in 2010 as NPT party states, but not with India.

Following the 2008 India–US civil nuclear cooperation deal, the ALP Government joined Washington in the India-specific waiver by the Nuclear Suppliers Group. But this left Australia with an illogical and untenable policy of supporting open access to global nuclear trade for India while not selling it Australian uranium. The Bush Administration argued there were significant nonproliferation benefits of bringing India inside the tent of safeguarded nuclear commerce and export controls; that putting most of its nuclear reactors under international safeguards was better than having none under such controls; and that India’s nuclear weapons program would continue regardless of international civil cooperation. India also augmented its “impeccable nonproliferation record” with strengthened domestic and export controls, a unilateral moratorium on nuclear testing and support for total nuclear abolition through a nuclear weapons convention.

It soon became clear to policymakers in Canberra that Australia’s uranium recalcitrance was a major hindrance to the broader bilateral relationship. The oddity of selling uranium to China and Russia was also questioned. As a responsible uranium exporter, Australia has to satisfy itself about the safety record and risks of reactors in the recipient countries; the security of materials and facilities against theft, leakage and raids, the adequacy of safeguards against diversion to non-civilian uses—such as making nuclear weapons—and proliferation risks. There are also not so insignificant issues of safe nuclear waste disposal, as shown by the controversy over Muckaty in the Northern Territory.

Like China and Russia, India operates nuclear reactors for both peaceful purposes and military uses. The civilian reactors that are not for military use are subject to international safeguards under the IAEA’s oversight. In the past, the world has had greater worries about the security of nuclear materials and facilities in Russia – the problem of the so-called loose nukes – than in India. And India’s record of proliferation to third countries is superior to China’s past complicity in the proliferation of materials and designs to North Korea and Pakistan (remember A.Q. Khan?).

Asia will provide most of the market growth opportunity for uranium in the foreseeable future, and Australia has the advantages of proximity to this growing market. The bilateral agreements with China and India mean that Australia is already covering one-third of the world’s population and has been given access to the two big growth-potential markets. The world price of uranium has been depressed for some time and the finalisation of the India deal could give it the necessary boost to incentivise uranium exploration and production. The economic benefits could potentially be optimised even more if Australia moved into some of the value added phases in the global supply chain.

Nonetheless, against the larger considerations of bilateral relations with a democratic India across the Indian Ocean at a time when assertive Chinese visibility and activity is growing in the East and South China Seas, the anticipated economic gains from uranium sales are modest. Compared to the $63 billion iron ore export industry, for example, Australia’s uranium exports are worth only $1 billion and the most optimistic projections would see the rise restricted to under $2 billion. While the fear of losing market share in the long run to competitors might be a relevant commercial consideration, the changed policy is more persuasively attributable to adjustments to changed geopolitical circumstances and efforts to consolidate and deepen bilateral relations with one of the key emerging powers of this century. It is clear that India will matter greatly to Australia both economically and geopolitically; as well as being the current largest source of immigrants and second-biggest source of university students.


Ramesh Thakur is the Director at the Centre for Nuclear Non-Proliferation and Disarmament, The Australian National University.

Published September 3, 2014