Canada, Australia cool toward lifting Indian uranium embargo

Bonn (Platts)--24Feb2006

The governments of Australia and Canada have internal reservations thus far
about an anticipated lifting of an international trade embargo against sales
of natural uranium (NATU) or enriched uranium product (EUP) to India, Western
officials said last week.

As a part of a US-India nuclear trade proposal launched last year, India aims
to get approval from the members of the Nuclear Suppliers Group (NSG) to lift
the NSG's embargo on member states exporting uranium to India. Because India's
domestic uranium resources are very limited, getting access to imported
uranium is a key Indian objective in reaching an agreement on nuclear
cooperation with the US, a US official said last week.

It will be up to NSG to decide, on the basis of the US-India agreement
currently under negotiation, whether it will agree to a US proposal to provide
an exception for India and allow NSG members to export NATU and EUP to India.
The NSG will be briefed by US officials on progress in negotiations during an
NSG meeting in Vienna next month. But NSG sources said last week that NSG is
not expecting that it can proceed to make any decisions until there is much
more progress in the negotiations, delaying any NSG action until perhaps
mid-2006.

Nonetheless, Western officials said, inside both the Australian and Canadian
governments, on grounds of nonproliferation policy, there are deep
reservations about changing national rules or guidelines which so far prohibit
Australian-origin or Canadian-origin uranium from being exported to India.
Even if NSG were to agree to lift the NSG embargo by consensus, officials
said, Ottawa and Canberra might not agree to amend national rules and allow
uranium to be exported to India.

At the same time, US diplomatic sources said, it can be assumed that other
major uranium exporting countries, including Kazakhstan, Namibia, South
Africa, and Russia, would likely permit sales of uranium to India on the basis
of the pending US-Indian deal. But they said such an agreement by these
countries would likely depend on whether the NSG would by consensus lift its
embargo on uranium exports to India.

In Canada, Ottawa sources said, it can be expected that the issue of whether
the Canadian government would approve future exports of Canadian uranium to
India will be far more sensitive than a pending relaxation of Canadian
controls on NSG Part II dual-use items to India as part of a Canada-India
nuclear safety agreement which Ottawa has agreed to but, because of
outstanding Indian assurances, is not yet in place.

The national significance of any proposal to allow Canadian uranium exports to
India would be great enough, the sources said, to require that a formal
cabinet decision be taken by the Canadian executive branch. Input would be
given by the departments of foreign affairs (FAC), international trade, the
Canadian Nuclear Safety Commission (CNSC), and the Prime Minister's Office
(PMO). FAC would be the lead agency and will likely file a memo to PMO on the
subject, and the most significant nonproliferation policy input will be
provided by FAC and CNSC, sources said.

Thus far, the issue of uranium trade with India is not on the agenda of the
PMO, the sources said. The minority government which took power this month is
beset by other issues, they outlined.

Canada's uranium producers are aware that the Canadian government has strong
reservations about aspects of the US-Indian nuclear deal, particularly
regarding safeguards on the Cirus reactor supplied by Canada to India during
the 1960s. Canadian uranium producers are therefore mulling how to sell
non-Canadian-origin NATU to India.

Last year, Canadian sources outlined that, unlike in the case of trade with
India, Canadian uranium miners may export NATU to China, since there is in
place a bilateral nuclear cooperation agreement between the two countries and
because Ottawa has determined that China is conforming to nuclear
proliferation standards which are the yardstick for bilateral cooperation.

There is presently no such basis for Canadian-Indian uranium commerce since
Canada's bilateral nuclear cooperation agreement with India was nullfied by
Canada in 1974 following India's use of plutonium generated by the Cirus
reactor in a nuclear explosion.

Commercial sources spelled out last year that, on the basis of existing
Canadian law, Cameco may export output from a joint venture in Kazakhstan to
China in a few years. Sources said that should Kazakhstan agree, Cameco may
also in the future ship Kazakh-origin U to India without recourse to Canadian
restrictions on nuclear commerce with India, since there is no
Canada-Kazakhstan nuclear cooperation agreement. In the case of any planned
export of US-origin U from Cameco to India on the heels of a final US-Indian
nuclear agreement and a shift in NSG policy toward India, however, the matter
may be "more complicated," one diplomatic source said, since there is a
Canadian-US nuclear cooperation agreement in place. If it is ruled that that
agreement permits extra-territorial application of Canadian nonproliferation
rules in the US, Ottawa may be able to prevent the export of US-origin NATU by
Cameco's US subsidiaries to India, sources suggested.

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