This week, New Zealand will host the annual plenary meeting of the Nuclear Suppliers Group in Auckland. NSG is a cartel of countries which deal with trade in sensitive nuclear material and technology and seeks to control exports in these commodities. Formed as a response to the 1974 nuclear tests conducted by India, NSG has promulgated two sets of guidelines for its member states in regard to nuclear commerce.  The first deals with technology and material specifically designed for nuclear use (INFCIRC/254, Part 1). The second is for dual use items- items not intended for nuclear use but can have fallouts for use in nuclear programs (INFCIRC/254, Part 2).

This will be the 20th plenary session of the NSG. This year’s plenary is important for two reasons. First reason, which is formally in the agenda of the meeting, is the issue of fresh restrictions on the transfer of enrichment and reprocessing (ENR) equipment and technology. For more than six years now, the NSG has been deliberating on the criteria for tightening the flow of technology in ENR to new states. Though President Bush in 2004 proposed blanket ban on transfer on ENR technology, the other NSG members rejected that proposal while debating the need for adopting strict guidelines. Consensus is eluding the NSG on this issue. There are two roadblocks. First, is that many states within the NSG see these revisions as a deliberate ploy of the current technology holders to hang onto their advantage in nuclear fuel production and not to loose on a lucrative business by enabling more states to be fuel producers. Second, is related to the provisions of making the Additional Protocol (AP) mandatory as a condition for commerce in ENR technology by the G-8 countries. Countries such as Brazil, South Africa, Turkey and Argentina, all members of the NSG, have contested this stipulation on the grounds that AP is not a part of the original bargain under article VI of the NPT. However, the G-8 countries have already taken up the cudgels in this regard. They, in their annual meeting in 2009 at L’Aquila Italy, announced their unilateral adherence to the new guidelines on ENR technology transfers even when the 46 nation NSG is still debating the issue.

The issue which is not on the agenda of the meeting is more explosive. This is in regard to the agreement between China and Pakistan where by China has agreed to sell two additional reactors – Chasma 3 and Chasma 4 - to Pakistan. Both reactors would be 320 Mega Watts (MWe) Pressurized Heavy Water Reactors (PWR).   China has already built Chasma 1- a 325 MWe PWR- which was agreed in 1990 and commissioned in 2000. Chasma 2, similar to Chasma 1 is under construction since 2005 and is supposed to be completed by next year.

The problem in the deal is that Pakistan is not a member of the NPT and therefore, China, being a member of the NSG, is suppose to follow the guidelines of not trading with non-NPT signatories until and unless they accept full scope safeguards.  A full scope safeguard would entail all Pakistani nuclear facilities to be put under IAEA safeguard which is not possible since Pakistan is a declared nuclear weapon program. Currently, it only employs limited safeguards on specific nuclear facilities.

When China joined the NSG in 2004, it clearly indicated its intentions to supply Pakistan with an additional reactor in Chasma (Chasma-2), few research reactors and fuel for reactors built by it. This is possible under the Grandfather clause (Paragraph 4C, INFCIRC/254, Part 1) which exempts countries from NSG guidelines in meeting obligations incurred prior to their joining the group.

The whole question than is whether China will supply reactors to Pakistan without consulting the NSG? Or will it invoke the Grandfather clause in rationalizing the deal? Or, will it seek an exemption from NSG as USA did for India during the Indo-US nuclear deal.  China can take the first route since NSG guidelines do not equate to treaty obligations and legally, China will not be in violation of International Law if it sidelines NSG guidelines. However, as official sources in China have indicated, China is most likely to make an announcement of the deal in the last days of the plenary meeting invoking the Grandfather clause. However, USA has contested this possibility on the grounds that China, at the time of its joining the NSG in 2004, did not make a mention of any reactor deal except for Chasma-2 and hence, cannot invoke the Grandfather clause. It has explicitly asked China to go through the process of asking the NSG for a Pakistan specific exception analogous to the India specific exception which USA sought in 2008. It is not very clear whether China will follow this course of action. Pakistan’s record in nuclear smuggling would obviously make such a possibility highly improbable. Also, China would not like to let loose the cat in the pigeon hole, since a discussion of Pakistan’s proliferation record would unfurl unhealthy questions about China’s own image in nuclear proliferation business.