Unfinished Business: Is The Indo-US Nuclear Deal Finally Ready To Fly?

More than 18 years after India and the United States (US) inked a historic civil nuclear deal, the full potential and promise of this monumental agreement may finally be within reach.

In a significant move, the US has announced plans to soon remove Indian scientific and nuclear entities from its “restricted lists,” paving the way to "fully realise" the promise of the 2006 agreement signed by Prime Minister Dr Manmohan Singh and President George W Bush.

Speaking at IIT Delhi, US National Security Advisor Jake Sullivan said: “Although former President George W Bush and former Prime Minister Manmohan Singh laid out a vision of civil nuclear cooperation nearly 20 years ago, we have yet to fully realise it... the Biden administration has determined that it is past time to take the next major step in cementing this partnership.”

“So today, I can announce that the United States is now finalising the necessary steps to remove long-standing regulations that have prevented civil nuclear cooperation between India’s leading nuclear entities and US companies.

"The formal paperwork will be completed soon, but this will be an opportunity to turn the page on some of the frictions of the past and create opportunities for entities that have been on restricted lists in the United States to come off those lists and enter into deep collaboration with the United States, with our private sector, and with our scientists and technologists, to move civil nuclear cooperation forward together,” he said.

An Important Piece Of Unfinished Business

What was once hailed as a revolutionary deal — the Indo-US Civilian Nuclear Agreement, popularly known as the 123 Agreement — was meant to transform nuclear commerce between two of the world’s largest democracies.

Yet, nearly two decades later, massive hurdles remain.

For instance, nearly 20 years after the nuclear deal was unveiled, no deals have been struck to build nuclear power plants with international suppliers other than Russia.

While New Delhi is yet to remove obstacles preventing it from purchasing nuclear reactors from the US, Washington has failed to match policy with bold vision.

One key obstacle is India’s Civil Liability for Nuclear Damage Act (2010), which deviates from global norms by assigning liability not just to operators but also to suppliers in the case of nuclear accidents.

This has left US nuclear firms, like Westinghouse, wary of engaging with India, fearing exorbitant compensation claims without a guarantee of limited liability in the event of an accident.

On the US side, “10CFR810” authorizations under the US Atomic Energy Act of 1954 pose a major hurdle. These regulations restrict US nuclear vendors from manufacturing equipment or performing nuclear design work in India, although they can export equipment under strict safeguards. This limitation stifles India’s ambition to co-produce nuclear components and join the manufacturing value chain.

One of the critical barriers to fully realising the Indo-US nuclear deal has been the inclusion of key Indian government entities on the US Entity List, preventing American companies from collaborating with these institutions.

The Entity List, compiled by the Bureau of Industry and Security (BIS) under the US Department of Commerce, targets foreign individuals, companies, and organisations deemed to pose national security concerns.

Entities on the list face stringent export restrictions and licensing requirements for technologies and goods that could potentially contribute to activities such as 'terrorism, weapons of mass destruction (WMD) programs, or actions contrary to US foreign policy and security interests.'

While Sullivan refrained from sharing specifics, sources suggest that three government-run institutions — Bhabha Atomic Research Centre (BARC), Indira Gandhi Atomic Research Centre (IGCAR), and Indian Rare Earths Limited (IREL) — could soon be removed from the blacklist.

The Last-Minute Push

The Biden administration's recent announcement, a fortnight before US President-elect Donald Trump assumes office, signals a renewed urgency to revive the long-stalled Indo-US nuclear agreement.

A visit by Sullivan — his final foreign mission as National Security Advisor — particularly in the waning days of an administration, is an anomaly and accentuates the strategic significance Washington attributes to this breakthrough.

However, as the Biden era closes, questions loom about the fate of the deal under the Trump administration.

The Republican Party played a pivotal role in laying the groundwork for the nuclear agreement during President George W Bush’s tenure. Trump may view completing the deal as cementing a significant bipartisan foreign policy triumph, though his approach to advanced technology and domestic priorities could reshape the framework.

Policymakers in Delhi and Washington recognise that nuclear energy is once again in the spotlight, driven by an unexpected catalyst — the booming AI industry. As such, there exists a plausible vested interest in advancing and consummating the Indo-US nuclear collaboration.

"Trump’s approach to advanced technology development might significantly differ, and Delhi must prepare for its consequences," cautions C Raja Mohan, Director of Carnegie India, as the contours of Trump’s policies begin to emerge.

What’s Next

With Biden continuing the legacy of what began with the intense negotiations between President George W Bush and Prime Minister Manmohan Singh during 2005–08, India now faces its own set of challenges.

A critical task lies in modifying the provisions of the Civil Liability for Nuclear Damage Act, which has long impeded foreign participation in India's nuclear energy program.

Ashley J Tellis, Tata Chair for Strategic Affairs and senior fellow at the Carnegie Endowment for International Peace, notes that it is high time for the Modi government to tackle the nuclear liability issues it inherited. Ironically, these stem from the actions of Modi’s own party, albeit long before his leadership, adds Tellis.

The most straightforward solution? Amending India's Civil Liability for Nuclear Damage Act (CLNDA) to bring it in line with the Convention on Supplementary Compensation for Nuclear Damage (CSC) by channelling all liability in the case of a nuclear accident solely to the operator of a nuclear plant, with the operator in turn protecting its interests by relying on an insurance pool for financial safety, notes Tellis.

While India has already begun creating such a pool under the CLNDA, it remains underfunded and requires immediate attention.

That said, much has changed since 2006. What unfolds in the aftermath of 20 January will demand a fresh strategic outlook.