US-INDIA NUKE DEAL PREVENTS TIRADE ON SINO-PAK DEAL

SYED FAZL-E-HAIDER
(feedback@pgeconomist.com)

May 17 - 23, 2010

A nuclear deal the United States signed with India in 2008 is one of the main reasons that prevents Washington from openly criticising the Chinese export of two nuclear power reactors to Pakistan, says a report recently released by a US think-tank. China is poised to export two power reactors to Islamabad amid persistent concerns about the safety of nuclear materials in the restive south Asian country.

The US is expected to tolerate China's new nuclear deal with Pakistan because President Barack Obama wants China's support for United Nations Security Council sanctions against Iran this spring, according to the US think-tank. Pakistan's existing civilian nuclear energy program, with one working power station and another under construction, was developed with Chinese aid.

Last month, the country expressed its desire to gain recognition as a nuclear state at a two-day Nuclear Security summit in Washington by claiming that it has acquired advanced nuclear fuel cycle capability and can offer it to the rest of the world under IAEA safeguards. Beijing supported Islamabad in its quest for civil nuclear technology when it declared at the summit that every country had the right to the peaceful use of nuclear technology.

Local analysts attach great importance to China's technical and financial assistance and involvement in construction of more nuclear power plants particularly after Pakistan's hopes for civil nuclear cooperation were a non-starter in its "strategic dialogue" with the United States in Washington last month.

"The pending Sino-Pakistan deal reflects the growing confidence and assertiveness of China's nuclear energy programme," according to a report recently released by the Carnegie Endowment for International Peace in Washington.

"President Barack Obama will not openly criticise the Chinese export because Washington, in the context of a bilateral security dialogue with Islamabad, may be sensitive to Pakistan's desire for civilian nuclear cooperation in the wake of the sweeping US-India nuclear deal," said the report while explaining the first reason for a muted US reaction.

The US administration, however, might object to it inside the Nuclear Suppliers Group, which oversees such transactions. Such objections, however, "cannot prevent China from exporting the reactors", the report added.

China has so far been the only country willing to cooperate with Islamabad in the nuclear sector, but Beijing's ability in this respect is limited. China is assisting Pakistan both financially and technically in the construction of small nuclear power plants. Beijing reportedly committed to support Islamabad on its demand for seeking civil nuclear cooperation from the US and the two states attended the conference with a joint strategy.

"We strongly support efforts to enhance international nuclear security and the equal right of all countries to the peaceful use of nuclear energy," said the Chinese national statement presented at the Nuclear Security summit in Washington.

China has agreed to bear over 80 per cent cost of Pakistan's Chashma-3 and Chashma-4 nuclear power projects of 320 megawatts each. Chinese companies will reportedly build at least two new 650-megawatt reactors at Chashma in district Mianwali of Punjab province over the next seven years to overcome energy shortages in the south Asian country, which is presently facing a deficit of 4,000 to 5,000 megawatts, resulting in torturous load-shedding for hours in a day.

China began building a reactor at Chashma in 1991 and broke ground on a second one in 2005, which is expected to be completed next year.

Financing for two new nuclear reactors at Chashma was agreed by the two sides in February, said a statement posted on the website of the China National Nuclear Corporation on March 1.

Under the deal, China will provide 82 per cent of the total $1.91 billion financing to Pakistan for the projects at Chashma site. Interestingly, the Chinese companies will complete the work on Chashma-3 and Chashma-4 and the Chinese official bank would repay the amount when the company would submit the bills.

Pakistan would arrange 18 per cent of the total financing of the two nuclear power projects and China would provide Pakistan a soft loan for a period of 20 years with eight-year grace period. The two projects are being established for meeting the growing power shortfall in the country and Executive Committee of the National Economic Council (ECNEC) has already approved these projects.

The Inter-Governmental Framework Agreement has loaning facility in three phases. The first loan is $104million with an annual interest rate at 1 per cent, the second loan is $1billion with annual interest rate of 2 per cent and the third loan is worth $474 million with annual interest rate of 6 per cent.

Chashma-3 and Chashma-4 nuclear power plants are being built by Pakistan Atomic Energy Commission (PAEC) and China Zongyuan Engineering Corporation (CZEC).

Established in March 1983, China Zhongyuan Engineering Corporation (CZEC) is an economic entity, which is directly affiliated to China National Nuclear Corporation (CNNC). Headquartered in Beijing, the CZEC is engaged in the activities of international economic and technological cooperation. It has ascended into the international market and continuously developed and expanded the overseas and domestic markets.

Under the leadership of CNNC, the CZEC has successfully created a precedent in the history for China's exporting of nuclear technology and nuclear power plant to the world. It has taken the construction of large-sized international nuclear engineering projects. It has been listed in the top 225 international contractors for years in success since 1996 by the authoritative magazine Engineering New Record (ENR) published in USA.

PAEC is presently the country's largest Science & Technology organisation engaged in the peaceful uses of nuclear energy. PAEC has set up research centers in agriculture, medicine, biotechnology and other scientific disciplines all over the country. The Commission is successfully operating two Nuclear Power Plants- Karachi nuclear power plant (KANUPP) and Chashma nuclear power plant-1. The Chashma-1 is a two-loop power plant with gross output of 325MW and net output of 300 MW and life span of 40 years.

In April 2009, Pakistan signed a general engineering and design contract for Chashma-3 and Chashma-4 with Shanghai Nuclear Engineering Research and Design Institute (SNERDI). The units will both have generation capacity of 340 megawatts and a design life of 40 years. Much of the design work has already been completed by SNERDI. Systems and major equipment of the nuclear island, including the NSSS, are designed by SNERDI.

Islamabad had estimated the cost of Chashma-3 and Chashma-4 worth Rs129.905 billion, with foreign currency component of Rs80.360 billion in the Public Sector Development Program (PSDP) for last fiscal year 2008-09. The cost however rose to over Rs140 billion from Rs129 billion mainly because of depreciation of rupee against dollar in last fiscal year.

The US wants Islamabad to address its immediate energy needs instead of pinning its hopes on a civilian nuclear deal, which is not a dream about to come true soon. Instead of a nuclear deal, the US plans to help the country refurbish three thermal and one hydropower plant that will add some 4,500MW to the national grid.