September 09, 2014
SEPTEMBER 6, 2014 RAJARAM PANDA
By Rajaram Panda
The Australian Prime Minister Tony Abbott made his first official visit to India from 4 to 6 September to further strengthen the strategic partnership and promote trade and investment cooperation between the two countries. In the changing international context in which newly emerging powers with power ambitions are threatening the established international order, a series of realignment of power relations amongst nations in the Asia-Pacific region is taking place. As a result, one sees a flurry of visits of leaders to each other countries to engage in talks how to manage this new situation without destabilising the established order. Tony Abbot's India visit may be seen in this context as another move in that direction.
As was expected, the biggest achievement was the big-ticket item of signing the civil nuclear deal. India thus secured another endorsement for its status as a peaceful nuclear power. The issue of uranium export to nuclear-armed India had remained a contentious issue for quite some time with opinions sharply divided in Australia. Non-proliferation concerns also governed negotiations between the two countries, but both subsequently agreed to the non-proliferation commitments made by India, which includes India quarantining its civilian nuclear power sector from its weapons programme. Negotiations surrounding arrangements for the export of uranium continued and were completed before Abbott undertook his journey to India. India convinced Australia that the uranium would not be used for nuclear weapons and Australia was assured of India's commitment to peaceful power generation. In his address in Mumbai, Abbott admitted India's "impeccable non-proliferation record" and India as "a model international citizen". This deal made Australia one of India's top strategic partners.
Though India has signed nuclear supply agreements with countries like Canada, Kazakhstan and Argentina, Australia was a much sought after source because of the quality of its uranium. Australia's previous Labor government moved to lift the ban on selling uranium to India in 2011 in a bid to strengthen relations with the fast-growing economic powerhouse. The negotiations for a nuclear safeguards agreement started when Australian PM Julia Gillard visited India in October 2012. At that time, Australia stressed that any export would have to be accompanied by guarantees that uranium would only be used for power facilities and not for military purposes.
The Labor government previously opposed selling uranium to India on the basis that India was not a signatory to the nuclear non-proliferation treaty. This remained a long barrier to any trade deal. But Gillard secured majority support at Labor's national conference in December 2011 to overturn the ban after it felt confident to secure a nuclear safeguard agreement with verification mechanism.
Australia holds about a third of the world's recoverable uranium resources and exports nearly 7,000 tonnes a year. Though Abbott made no mention of anything related to the uranium sale to the press prior to his departure despite reports that the deal will be signed, the Australian Broadcasting Corporation had confirmed that the deal would be signed during his trip.
The Greens Party, however, is not happy with the Abbott government's decision on uranium sale. According to Greens senator Scott Ludlam, India's nuclear industry had been "plagued with accidents and near-misses at reactor sites". He further argued that Australia would be directly complicit in fuelling the nuclear arms race between India and Pakistan and suggested instead that Australian industry should be partnering with India's vibrant solar sector. Such dissident views did not deter Australia's trade minister Andrew Robb to announce that uranium sales could begin soon. Green leader Christine Milne's criticism for using the Russian trade deal as justification for uranium exports to India also proved to be weak.
Interestingly, while Australia signed the uranium export deal with India for peaceful power generation, its exports of nuclear fuel to Russia have been banned until further notice. Australia's official end to the uranium trade with Russia was a part of trade sanctions triggered by Russian military intervention in Ukraine. Australia felt that Russia violated international law and therefore justified its ban, though the Greens had always argued that the deal had always been a mistake. In fact, though a previous government struck a trade deal with Russia, only a single shipment was made in 2012, five years after an initial trade agreement was reached between Moscow and Canberra. With this, Australia joined with the US and European Union in response to Russian soldiers violating Ukraine sovereignty. The agreement with India is expected to double overall exports to a billion dollars annually by 2018.
As the Modi government embarks on the second phase of economic growth strategy after Manmohan Singh had started it, India's demands for energy has increased. Currently, India is heavily dependent on coal for generating power and has 20-odd small nuclear plants with plans for more. Australia has a great role to play in meeting India's energy demand. Besides supplying coal and jointly mining in India, the nuclear deal will help India ramping up its plans to expand nuclear energy and help mitigate from its crippling power shortages. Despite the hue and cry that anti-nuclear lobbyists continue to make, nuclear as a source of energy accounts for less than 2 per cent of the India's total energy needs. Taking the clue from the Fukushima experience, if adequate safety measures are adopted to prevent a nuclear accident, there is no reason why India should not pursue using nuclear as a source of energy as it is clean, reliable and cost-effective. Even while the economy and the vast middle class base expand, India continues to struggle to produce enough power to meet the rising demand. According to a recent World Bank report, nearly 400 million still have no access to electricity and crippling power cuts are common even in big cities. Expanding the nuclear power base would mitigate some of these woes and reduce dependency on coal, hydroelectricity and other sources of power.
Both India and Australia are already strategic partners with growing economic and trade ties. India is Australia's fifth largest export market with total exports of $10.7 billion (A$11.4 billion). The total bilateral trade is worth around $15 billion and both countries have the aim to substantially increase this figure. Though it would look miniscule as compared to Australia's trade ties with China (more than $150 billion) and Japan, for example, yet it is substantial as Indian economy bounces back to the path of economic growth after a temporary hiccup during which a series of scams and policy paralysis hit the government. The revamping of growth strategy of the Modi government has revived hope and India's trade partners have again started evincing interest in India with promise of substantial business in the form of trade, investment, co-production, technical collaboration, etc.
Prior to his departure, Abbot was candid in observing that there is potential for further cooperation in resources, science, technology and education and that he is keen to engage with the Modi government to increase bilateral cooperation to advance mutual interests. The trip was also a good opportunity to promote the mutual G-20 objectives ahead of the Brisbane summit in November, which Modi will attend. With Modi returning from his first visit to Japan on 3 September and Abbott arriving the following day and Modi again seeing him in November in Brisbane, it would be the first time in the history of the bilateral relationship that there would be two visits within a calendar year. Though several Australian Prime Ministers have paid visits to India, no Indian Prime Minister has made reciprocal visit to Australia since Rajiv Gandhi's visit in 1986. That aberration will be over with Modi's visit to Brisbane in November. It will be also a good opportunity for both the leaders to follow up the issues that were taken up for discussion in New Delhi.
That Abbott was accompanied by a group of senior business leaders reflected the breadth of Australian commercial interests in India. It also showcased opportunities for further business partnerships between the two countries. With this in view, Abbott chose to visit Mumbai, India's financial capital, before New Delhi, with a view to diversify Australia's market into India, deepen strategic ties and strengthen two-way trade and commerce. The shared political bonhomie would also help in facilitating the future cooperative partnership.
Besides uranium, Australia is also a major source of supplier of other raw materials and must figure prominently in Modi government's energy security strategy. In fact, Australia will be natural candidate in India's energy strategy as it was for Japan in the past and for China at present. India is among Australia's largest coal export partners. Both are currently in the process of working out the administrative arrangements that will govern the actual implementation of the deal. Australia recently cleared Gautam Adani's Carmichael coal project in the Galilee basin in Queensland, which holds some of the largest untapped coal reserves. "This mine will be one of the largest in the world", observed Abbott in Mumbai.
Also, Petronet, an Indian company, signed in August 2009 a 20-year deal to buy 1.44 million tonnes per annum of liquefied natural gas from Australia's Gorgon terminal. In view of growing demand in India to fuel its economic growth in the coming years, the prospect for deepening and expanding resource trade between India and Australia look promising.
Mining in India is an area that could throw employment opportunities as well as contribute to the growth strategy. Can India take advantage of Australian expertise on this? In view of the past Coalgate scam, the Modi government needs to review the governments mining policy, allowing overseas conglomerates to participate in the mining activities. Responding to Modi's "Make in India" slogan made at the rampart of the Red Fort on 15 August, the message had gone loud and clear to overseas players such as Australia's Rio Tinto, BHP Billiton and Hancock, all resource giants, who are willing to partner with India for joint ventures.
After catering to the Japanese market in the 1970s and 1980s, Australia shifted to China when Japanese economy went into recession and China emerged as the new destination for its resources. In view of China drifting its political course in recent years, Australia has started to rethink not to put all its eggs in the Chinese basket and looks at India as the next logical candidate to deepen business. Shared common values, democracy, historical cultural links and others drive the Australian policy towards India.
While in Mumbai, Abbott launched Australian government's New Colombo Plan in India and felicitated Australian cricketer Adam Gilchrist and Brett Lee and India's Sachin Tendulkar. He also signed a MoU in the field of sports, besides laying a wreath at the memorial for the victims of 26/11 attacks at Hotel Taj Mahal Palace.
Speaking at an event in Mumbai, Abbott observed that international trade and investment enrich people and build relations among peoples and nations and assured supplies of Australian resources to meet "India's energy security for decades to come". Admitting that Australian resources are fuelling India's prosperity, Abbott also observed that India by buying Australian resources and investing in the resource sector is also supporting Australian growth and jobs. In particular, he expressed happiness in Adani's Group's development in the Carmichael coal deposit in Queensland.
Both countries have history of cooperation in supporting stronger education. In 2013, 36,000 Indian students went to Australia to pursue different vocations and there has been an increase of 15 per cent in applications in 2014. Australia is a willing partner in Modi's focus on vocational skills training for hundreds of millions of young Indians. Even in the field of food security, Australia's world-class agricultural sector can support India from better crop and herd productivity to storage and transport, cold chain supply, food-processing and retail.
In the field of infrastructure, both Modi and Abbott are committed to spend billions of dollars to expand the economic horizons of their countries. During his visit to Japan, Modi successfully secured a Japanese commitment to invest $35.5 billion dollars in India over a period of five years. That is a staggering figure. Similar opportunities exist between India and Australia. Cooperation between construction companies, cooperation in city to system design, green technologies and financing provide great opportunities in each other's countries. India can tap Australian finance as Australia has the potential to become a financing powerhouse in India. Other areas such as health, information technology, biotechnology and other sectors also have great potentialities for cooperation.
Since Abbott's India visit came a day after Modi returned from Japan, some analysts started reading if this was a deliberate strategy to form some sort of 'alliance' between the three countries – India, Japan and Australia – to counter the Chinese challenge. A couple of months ago, Abe also had made a state visit to Australia where he addressed the lawmakers in the Parliament house. Though the three countries share common values and interests, it would not be in conformity with India's foreign policy interests to get embroiled in a front that would work against China. India is currently in an economic growth path and has no intention to compete with China in terms of influence though it would advance its own interests if China attempts to intrude into its external periphery. In fact when the Chinese President Xi Jinping visits India in mid-September, it is likely that economic issues shall dominate, leaving the political differences in the background. This does not mean to suggest that New Delhi is likely to endorse Beijing's maritime expansion in the South China Sea, where India finds global rules are being violated by unilateral means by some countries. In fact, Modi made an indirect reference towards this 'expansionist' policy in his speech in Tokyo, without mentioning China directly. Like with Japan, Modi has developed personal rapport with Beijing and would like to engage more economically with Beijing than allowing political differences to cloud relations.
One would recall that in late 1960s, there was some initiative at academic level floated to form some sort of India-Japan-Australia trilateral relationship in the economic level. That initiative did not take off as no such compelling economic and political complementarities were found. In the present time when Asia is the midst of economic ascendance as the West is on the decline, it would inadvisable to harbour even the idea of forming 'alliance' by some against another as the economic rent to be accrued from deepening economic interdependence can be universally shared and mutually beneficial.
It is not to suggest that it has been all honky-dory in India-Australia bilateral ties. There have been periods when bilateral ties were strained but those were temporary hiccups and therefore passing clouds. Firstly, like Japan, Australia too over-reacted when India conducted the Pokharan II tests in 1998. That time, India sincerely felt that its overseas friends did not appreciate India's constraints in the realm of security environment in its neighbourhood which compelled India to detonate the nuclear test. Secondly, when the mandarin-speaking Kevin Rudd became Prime Minister, he tilted more towards China, thereby snubbed India. Thirdly, violence against Indian students in Melbourne and elsewhere in 2009 took bilateral ties to its nadir. The cumulative impact of these incidents meant that the potentials of a relationship remained unexploited. These past aberrations must not be allowed to cloud the current ties that have started showing signs of promise. Education and skill development, the two areas affected because of incidents of 2009, needs therefore a re-look.
While taking cognizance of fact that the economic weight has been dramatically shifting to the Indo-Pacific region, it is equally important to recognize that this is also accompanied by new strategic changes. It is here the interests of both India and Australia on strategic and security are enmeshed now more closely than ever before. This demands coordination of policies so that both can contribute to protect and promote stability and prosperity of the Indo-Pacific. To facilitate this bonding in the strategic sphere, both have reached agreement for "regular navy-to-navy exercises, given the growing importance of the maritime sphere".
Even during the 8th East Asian Summit and 11th India-ASEAN Summit at Bandar Seri Begawan in Brunei Darussalam in October 2013, Abbott had articulated his desire to deepen Canberra's strategic relationship with New Delhi and indicated an early closure on the nuclear deal. The fact that Abbott had become Prime Minister a month before the EAS meeting and articulated his priority to deepen ties with India with then Prime Minister Manmohan Singh demonstrated his sincerity and acknowledgment of India's emerging importance in the Indo-Pacific region as a strategic player and potentials to become an economic partner at bilateral level. His India visit in September reinforced this assertion. In fact, most of the dozen-and-a-half countries present there were seeking greater strategic engagement with India and this showed the kind of confidence that India evokes when it comes to defence and security matters of the Indo-Pacific region.
There was too much expectation that Modi would succeed to conclude a civil nuclear deal with Japan during his visit. That remained elusive. The Japanese political leaders have been unable to build consensus to ink such a pact with a country that refused to sign the nuclear non-proliferation treaty that it considers discriminatory. With Australia, friendly with Japan, convinced on India's commitment on safeguard and commitment not to use the uranium for weapon purposes, pressure on Japan is likely to ease and a nuclear deal may be reached soon, for which negotiations are still on. That could be another fruit that India could reap from Abbott's visit to India, thereby boosting India's security sector.
Dr. Rajaram Panda is The Japan Foundation Fellow at Reitaku University, Chiba, JAPAN. E-mail: email@example.com
Dr. Rajaram Panda, a leading expert from India on East Asia with focus on Japan and the Koreas, was formerly Senior Fellow at the Institute for Defence Studies and Analyses, and is currently Visiting Faculty at the Centre for Japanese, Korean and Northeast Asian Studies, School of Language, Literature & Culture Studies, Jawaharlal Nehru University, New Delhi.
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