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Nuclear Weapons & Proliferation
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June 26, 1998 Russia-India: West May Pressure IMF on Russian reactor sales Western governments may raise with the International Monetary Fund (IMF) Russian plans to provide special financing for the two nuclear reactors it has agreed to export to India. Last week Yevgeny Adamov, Minister of Atomic Energy, announced that terms had been reached to export to India two VVER PWRs, under a bilateral cooperation agreement from 1988. According to Indian sources, Adamov and the Russian agency MINATOM have agreed to provide financing for the $2.5-billion project at a rate of about 4%, about half the consensus OECD lending rate which governs nuclear export finance in these countries. Western officials now believe they may have sufficient leverage to stop the deal, given Russia's dependence on IMF and other Western funding. Immediately after the Indian tests, U.S. State Department officials said they saw no use in continuing to protest Russian plans to sell the reactors to India. But that has apparently changed now that Russian President Boris Yeltsin has officially requested a financial bailout package from the International Monetary Fund and G-7 donor nations of up to $15 billion. German, Belgian, British, and U.S. officials said this week that the reactor sale should be linked to any future IMF credits to Russia, since the West is on a course to halt IMF lending to India. If credits from the IMF go ahead to Russia, they could free up funds which Russia would then turn around and provide India at rates of interest 50% lower than the global market rate to aid India's nuclear program. Beyond that, these sources said, willingness to provide cut-rate export financing to India while Russia's finances are in turmoil is a sign that Adamov's motivation in selling the reactors to India is primarily political, aiming to cut out a sphere of influence in tweaking the West over its reaction to India's nuclear tests. Diplomatic sources also note that both IMF director Michel Camdessus and assistant director Stanley Fischer are warning governments that the multi-billion dollar lending package to Russia cannot be provided without strings. The U.S. and other Western states argue that Russia cannot export the reactors because the Nuclear Suppliers Group (NSG), to which Russia belongs, requires IAEA full-scope safeguards on all nuclear activities in any recipient country. Almost none of India's nuclear program is under safeguards. Russian officials counter that, because its initial 1988 agreement with India was made four years before the NSG required full-scope safeguards, the Indian reactor deal is grandfathered in. The West says this not the case, since the design of the power reactors Russia wants to sell to India now is not the same as an earlier design specified under the 1988 deal but which, for safety reasons, India no longer accepts. Nuclear Watch is written exclusively for Global Beat. Mark Hibbs is European Editor of Nucleonics Week and Nuclear Fuel, leading specialist newsletters on international nuclear affairs, published by McGraw-Hill, Inc. Hibbs, based in Bonn, Germany, covers nuclear energy and proliferation problems in Europe, the former Soviet Union, and Asia. Mark Hibbs' coordinates: Return to Global Beat Home Page Nuclear Watch | East Asian Security | Economic & Monetary Union | NATO Expansion | Nuclear Weapons and Proliferation | U.S. Defense Policy | Publications | Events | |
