Courcy's Future Threats - February 2014

In terms of nuclear proliferation, the subject of the South-Asian sub-continent is a contentious one. Both the US and China, members of the Nuclear Suppliers Group (NSG), provide technology and assistance to countries who are not Nuclear Non-Proliferation Treaty (NPT) signatories. The US provides assistance to India, and China to Pakistan. In the past, both supplier countries have found loopholes in the NSG rules (in the case of China), or obtained a waiver (in the case of the US), to achieve this with the approval (or at least without the active disapproval) of the other NSG members. Now, however, China is testing the boundaries, seeing how far it can stretch this tacit approval.

NSG rules state that members may not share technology with countries that have not signed the NPT. However, there have been exceptions. In the past, the US has helped out India with its nuclear power reactors; in 2008 a waiver was granted by the NSG to allow this to go ahead.

More recently, in 2010, China announced it was to give further assistance to Pakistan at its Chashma site by installing two new reactors (the agreements were actually signed in 2009); work began in 2011. In this case, China argued that the work at Chashma was ‘grandfathered’ by a deal reached with Pakistan over the site prior to China’s joining the NSG in 2004. Although this appeared a little tenuous, it was allowed through by the other NSG members.

At the time it seemed as if China and the US were playing a game of mutual politics, each allowing the other to push the limits of what is permissible under the rules without too much complaint (other than the necessary and predictable grandstanding rhetoric) in return for the other’s acquiescence on their own projects. However, with hindsight, this might have been a serious error on the part of the US.

By allowing China to continue its work at Chashma, the precedent was set for previous nuclear arrangements (made before NSG membership) to remain valid, which could have serious consequences.

Karachi

In November 2013, China and Pakistan launched into a new project to build a new, large nuclear-energy site in Karachi, able to produce 2,200 megawatts (MW) of power. The need for greater power generation in Pakistan is well recognised, but so are proliferation concerns.

“The beginning of the 2,200 MW power project is indeed a proud moment in the energy history of Pakistan,” Prime Minister Nawaz Sharif said at the ground-breaking ceremony.

Work on the $9.6 billion nuclear site is expected to be finished in 2019, and the facility will boast two Chinese ACP-1000 atomic reactors. China also will supply enriched uranium to run the reactors, according to Pakistani officials.

The $9.6 billion price tag is far too steep for Pakistan to manage alone, and the details of the financing for the new complex have not been officially released, but Reuters news agency claims to have had access to documents which show that China National Nuclear Cooperation (CNNC) has promised to grant a loan of at least $6.5 billion; something which was later confirmed by two members of the Pakistani government’s energy team and three sources close to the deal.

A further two sources, also speaking to Reuters (on condition of anonymity), confirmed that China has also waived a $250,000 insurance premium on the loan.

Ansar Parvez, chairman of the Pakistan Atomic Energy Commission (PAEC), which runs the civilian nuclear programme, said “China has complete confidence in Pakistan’s capacity to run a nuclear power plant with all checks in place…. As things stand, the performance and capacity of nuclear power plants in Pakistan is far better compared to non-nuclear plants.”

Parvez declined to give more details of the funding but confirmed that the plant is due to be completed by 2019, and each of the two reactors will be larger than the combined power of all nuclear reactors operating in Pakistan today.

Islamabad is right to be worried about its energy security. Estimates of Pakistan’s current generating capacity vary from 11,000 MW up to 14,000 MW. Estimates of total demand are just as varied, but range from 15,000 MW up to 18,000 MW. This means there is a shortfall of at least 1,000 MW and possibly up to 7,000 MW. Power shortages have crippled the already vulnerable Pakistani economy. Some areas have seen blackouts lasting more than half a day, creating a great deal of discontent and in some cases triggering violent protests. Energy insecurity is undermining an economy already struggling against high unemployment, widespread poverty, crime and sectarian and insurgent violence.

It can be accepted that work at Chashma is grandfathered by previous deals, but some believe it is questionable as to whether it covers work on the totally new project in Karachi. Even some strategic analysts in Beijing have privately acknowledged that it is far more difficult to make a case for the new Karachi agreements.

An insider (speaking anonymously) told China Outlook Magazine as long ago as August 2013 that the announcement of the Karachi deal was not a surprise to the industry, and that it was viewed by almost everybody as being in contravention of NSG rules. He said “It is completely illegal. As a member of the NSG, China should have respected the approval process…there are five nations already preparing to bring serious diplomatic consequences to China in international institutions.”

But these “diplomatic consequences” have not yet appeared. In fact, it is quite surprising how little public objection there has been to the Karachi project; only India seems to really care (wary, as it is, of both China and Pakistan). The US has said it “expresses its concern” at the developments, but that seems to be all. However, even if the international community has largely turned a blind eye to Karachi, it will struggle to do so in Punjab.

Punjab

On 20 January the Wall Street Journal reported that Islamabad was in talks with China on a brand new $13 billion deal to build another three reactors at a yet another new site at Muzaffargarh in Punjab province. The NSG does not appear to have any knowledge of this latest project, and details are still scarce, but it will become increasingly difficult for the international community to ignore China’s activities in Pakistan if the reports prove to be accurate.

Parvez has stated that Pakistan aims to generate 8,800 MW of nuclear power by 2030. “When we’re talking to the Chinese, we’re discussing how to get to 8,800 MW by 2030,” he said. “We’ll continue talking to them until we meet the 2030 target.”

Achieving a nuclear generating capacity of 8,800 MW will require Pakistan to build six to seven large nuclear plants, including the two already scheduled for Karachi, assuming they are all based on ACP-1000 reactors.

The danger of precedent

When the first notes of disgruntlement (such as they were) were sounded about the Karachi agreements, most of the critics pointed out that the new site was about 450 miles (700km) from Chashma, which made it a different project. But Beijing claimed that the project was covered under the same grandfathering arrangement as the work at the Chashma site.

The precedent has been set for the previous agreement to be recognised, and it covered more than just the Chashma site. Pakistan and China signed a long-term civil nuclear cooperation agreement on 15 September 1986 in Beijing, which is known to be for an initial period of 30 years and extendable unless any one party decides otherwise.

This agreement was signed by Pakistani Foreign Minister Yaqub Khan and his Chinese counterpart, in the presence of Chinese Prime Minister Zhao Zhiyang and Chairman of the Pakistan Atomic Energy Commission (PAEC) Munir A Khan, who in 1986 was also the Chairman of the International Atomic Energy Agency (IAEA)’s Board of Governors.

It was originally thought by most that this agreement would be nullified when China joined the NSG in 2004. But the acceptance that work at Chashma can continue because the arrangement was made prior to China’s joining the NSG leaves the door open for Beijing to claim that the 1986 agreement is still valid for all nuclear cooperation, which would allow China to undertake pretty much any nuclear project it likes in Pakistan.

Other members of the NSG, particularly the US, have been nervous of Pakistan having access to too much nuclear technology ever since the AQ Khan revelations. The waiver granted to India for its 2008 deal with the US allows it to purchase uranium on the open market for its nuclear power plants, which means it can devote more of its domestic supply to its nuclear weapons programme. Pakistan’s arrangement with China could have the same ultimate effect; if China is supplying the uranium for power generation, Pakistan can use more of its domestic supply for weapons.

• Abdul Qadeer Khan

AQ Khan was one of Pakistan’s (and indeed the World’s) top nuclear scientists, largely in charge of Pakistan’s entire nuclear industry (civilian and military). In 2004 it was revealed that he was the head of a vast proliferation network, supplying nuclear technology to anyone who could afford his services. There was much speculation that he supplied details of nuclear weapons to terrorist groups such as Al Qaeda, but no evidence of this has ever been found. What is certain, however, is that he supplied information and technology to rogue states, including Iran, North Korea and Libya. The degree to which AQ Khan’s activities were sanctioned by the Pakistani authorities has never been entirely clear.

Whether, in fact, the 1986 agreement can be shown to include all nuclear cooperation between China and Pakistan is debatable, but allowing the Chashma work to go ahead largely unchallenged has made the work of detractors a lot more difficult for all future projects. China may now have, to all intents and purposes, carte blanche to continue working with Pakistan as much as it likes, but the waiver granted for India to work with the US is specific and limited.

Nevertheless, both developing nations have found a way to continue building up not just their power generating capacity but also their weapons programmes with the general approval of the international community, risking an increased arms race in South Asia.