The China-Pakistan Reactor Deal and Asia's Nuclear Energy Race

Publication: China Brief Volume: 10 Issue: 12
June 11, 2010 11:31 AM Age: 8 days
Category: China Brief, Home Page, Foreign Policy, Military/Security, Energy, China and the Asia-Pacific, South Asia
By: Stephen Blank

Inlate April, China announced the sale of two nuclear reactors toPakistan. This deal is clearly against the guidelines of the NuclearSuppliers Group (NSG) and the spirit if not the letter of theNonproliferation Treaty (NPT) [1]. Nevertheless, the United States hasnot and may not even register a protest to this sale in spite of itsimplications for regional stability. Washington is seeking Beijing'ssupport for effective sanctions on Iran in the U.N. Security Council,which dampens the political will to take Beijing to task on otherinternational issues [2]. Although the announcement of this deal doesnot come as a surprise, the sale reinforces China’s long-standing tiesto Pakistan and the country's sensitive nuclear program, and ittestifies to the growing strength of China’s nuclear industry throughits ability and desire to export to foreign markets. As the Iranconnection also demonstrates, this deal is taking place within astrategic framework that extends beyond Sino-Pakistani relations.Indeed, China’s sale of additional nuclear reactors to Pakistan ishappening in the context of renewed aggressiveness by major nuclearpowers to export reactors and technology abroad on a global scale andthe parallel expansion of the desire by many Asian states for nuclearenergy.

China has already built one reactor, the Chasma-1 inPunjab and is building a second one, Chasma-2. According to the “new”deal, China is lending Pakistan $207 million to buy two more reactors,Chasma-3 and Chasma-4 (, May 21). Beijing and Islamabadargue that these new deals do not violate the NSG guidelines becausethey are part of the original deal for Chasma-1 and 2 from 2004 beforeChina joined the NSG (, May 21).

Pakistan has soughtnuclear reactors from China since 2008 at least and oft-cites asIslamabad's defense the 2005 Indo-American deal where the BushAdministration prevailed upon the NSG in 2008 to grant India a waivereven though it is not a signatory to the NPT. Naturally, the infuriated the Musharraf regime and its successor regime headed byPresident Asif Ali Zardari. Pakistan claimed that it also had urgentenergy needs that could only be solved by nuclear energy imports butthe United States, though it recognizes those needs, fobbed Pakistanoff. At the same time, however, India’s success with NSG owed much toits very good record on non-proliferation, something that cannot besaid about Pakistan (, May 21).

To be sure, China haslong supported Pakistan’s nuclear and military programs to check Indianpower. This deal is another sign of the Middle Kingdom's growingassertiveness in international affairs. For example, about a monthbefore the sale to Pakistan, China reportedly announced the opening ofa missile plant in Iran (The Straits Times, April 30). This missileplant, taken in tandem with China's growing nuclear exports, arguablybetokens an expansion in China’s support for dubious states in theproliferation context (Asia Times Online, May 22). The flap overBurma’s nuclear ambitions is further cause for concern about risks forregional instability. There is no doubt that China’s overall foreignand defense policy has become generally assertive but there is morewithin the context of this deal than its growing assertiveness.

Nonetheless,China’s assertiveness on these issues is palpable. China plays in thenuclear export arena as both an importer and exporter. It has importedreactors and enrichment plants from the United States, France andRussia (China Daily, June 9, 2008). It currently seeks to import thenewest fourth generation reactors for commercial use (China DailyOnline, May 19). Yet in 2008 after years of frustration it coordinateda state policy to develop nuclear power independently and it nowintends to compete with other exporters (e.g. South Korea) (Xinhua NewsAgency, February 18). Thus, China has recently opened up discussionswith Turkey and Arab states about selling Istanbul nuclear reactors andtechnology ostensibly for peaceful use (Xinhua News Agency, January 7;China Daily Online, May 12). Finally, although China never missesopportunities to proclaim its devotion to the cause of nuclearnonproliferation, it has in fact, been a major proliferator of missiletechnology to Iran, among others [3].

At the same time, China’simport and export activities reflect the growing global demand fornuclear power. The surge in demand for nuclear energy has severalcauses. Given the “oil shock” of the previous decade, even thoughprices have fallen 40-50 percent from their high in 2008, many stateswho lack hydrocarbon resources are searching for what they believe is amore stable, reliable, and domestically based source of energy in theface of expected recoveries of their domestic demand for energy.Another driver of demand for nuclear energy is the growing concern forthe dangers of climate change brought on by profligate hydrocarbon use.Allegedly, nuclear energy—safely and properly used—represents less of arisk to the environment. China’s deal with Pakistan must also be viewedin the context of this heightened competition to export nucleartechnology and the parallel-expansion in demand for it.

The mostrecent precedent of a nuclear energy deal is the U.S.-India nucleardeal whereby the United States will provide India with civilian nuclearenergy and for which Washington got a waiver in the NSG. At the time,it aroused much controversy precisely for the reason that it violatedNSG guidelines and the spirit of the Nonproliferation Treaty [4].However, since then there has been a veritable explosion of competitionamong Asian and European providers (including the United States) tosell nuclear technology abroad, not least to India. South Korea’sshocking victory over France in the competition to sell the UAE has hadmajor effects abroad in this context. South Korea clearly aims to be amajor nuclear power exporter. Is firms like Korea Electric Power co.(KEPCO) are active in India, China, Jordan, and Turkey [5]. South Koreaaims to capture 20 percent of the global market by 2030 and export 80nuclear reactors [6]. South Korean President Lee Myung-Bak has publiclyexpressed his belief that this deal with the UAE will facilitate otherexports abroad (The Korea Times, January 13).

Yet South Korea’s stunning example has not been lost on its competitors, Japan and China. For instance, in Japan,

Anew company should be formed later this year to support Japaneseexports of nuclear power technology and knowledge. The Ministry ofEconomy Trade and Industry (Meti) has agreed to set up the firm withinvolvement from utilities the Tokyo, Chubu and Kansai electric powercompanies as well as with reactor vendors Toshiba, Hitachi andMitsubishi Heavy Industries. The Innovation Network of Japan - a jointventure of government and industry - may also join. The move is seen asa reaction to South Korea's success in exporting to the United ArabEmirates and directed towards winning new nuclear contracts with theemerging nuclear countries of South-East Asia [7].

Not to beundone, Japan is now considering relaxing its restrictions on theexport of nuclear technology, specifically to India (part of the largerdawning Indo-Japanese partnership due to the rise of China). Thesediscussions reflect the forces driving the nuclear export and import inAsia. Since getting its waiver from the NSG India has concluded civilnuclear deals with the United States, France, Russia, and Kazakhstan. India clearly wants to cement ties with Japan in this and otherdomains, and Japan, likewise, wants stronger ties with India and not tobe left out of one of the biggest nuclear markets in the world [8].More recently, the two states agreed to form a working group to preparethe way for a reactor sale devoted strictly to peaceful purposes (AsahiShimbun, May 3). Clearly, the pressure from South Korea is promptingJapan to gear up and compete in the exploding Asian market with itsspiraling demand for electricity and all forms of power.

SouthKorea and Japan are hardly the only rivals in this field. France andthe United States are long-standing purveyors of peaceful nucleartechnology. Russia, since 2006 has been competing on a global scale foruranium sources and to see nuclear reactors across the globe. Moscow’sefforts in this field merit a separate analysis but it is a vigorousrival for these other Asian and Western exporters.

Therefore,China’s recent nuclear exports to Pakistan and the future of itsnuclear exports in general need to be examined these three contexts.The first context is that of the overall growth of the assertiveness ofChina’s diplomacy in general and efforts to use nuclear power andmilitary instruments like missiles as sources of influence abroad. Inthe case of exports to Pakistan, a second context is the long-standinggeopolitical rivalry among India, China and Pakistan in which China’s“all-weather” friendship with Pakistan has been a deliberate andconscious Chinese strategy to inhibit the growth of Indian power.Finally, and third we must keep in mind that China is not only anexporter of nuclear energy, it also is a consumer of that energy and soit will be a key market for other exports like Russia, the UnitedStates, France, South Korea, and Japan. As an importer, it obviouslywill welcome the rivalry of exporters who wish to sell to it so that itcan obtain more favorable terms. However, as an exporter of nuclearenergy and a power that wants to export more of it for both economicand political gain, it cannot afford to let either its rivals outpaceit in Asia or in other areas that China deems as essential to thepursuit of its larger strategic goals.

[The views expressed here do not represent those of the U.S. Army, Defense Department, or the U.S. Government.]

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