The China-Pakistan Reactor Deal and World Nueclear 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

In late April, China announced the sale of two nuclear reactors to Pakistan. This deal is clearly against the guidelines of the Nuclear Suppliers Group (NSG) and the spirit if not the letter of the Nonproliferation Treaty (NPT) [1]. Nevertheless, the United States has not and may not even register a protest to this sale in spite of its implications for regional stability. Washington is seeking Beijing's support for effective sanctions on Iran in the U.N. Security Council, which dampens the political will to take Beijing to task on other international issues [2]. Although the announcement of this deal does not come as a surprise, the sale reinforces China’s long-standing ties to Pakistan and the country's sensitive nuclear program, and it testifies to the growing strength of China’s nuclear industry through its ability and desire to export to foreign markets. As the Iran connection also demonstrates, this deal is taking place within a strategic framework that extends beyond Sino-Pakistani relations. Indeed, China’s sale of additional nuclear reactors to Pakistan is happening in the context of renewed aggressiveness by major nuclear powers to export reactors and technology abroad on a global scale and the parallel expansion of the desire by many Asian states for nuclear energy.

China has already built one reactor, the Chasma-1 in Punjab 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 (Cnsnews.com, May 21). Beijing and Islamabad argue that these new deals do not violate the NSG guidelines because they are part of the original deal for Chasma-1 and 2 from 2004 before China joined the NSG (Cnsnews.com, May 21).

Pakistan has sought nuclear reactors from China since 2008 at least and oft-cites as Islamabad's defense the 2005 Indo-American deal where the Bush Administration prevailed upon the NSG in 2008 to grant India a waiver even though it is not a signatory to the NPT. Naturally, the Indo-U.S. deal infuriated the Musharraf regime and its successor regime headed by President Asif Ali Zardari. Pakistan claimed that it also had urgent energy needs that could only be solved by nuclear energy imports but the United States, though it recognizes those needs, fobbed Pakistan off. At the same time, however, India’s success with NSG owed much to its very good record on non-proliferation, something that cannot be said about Pakistan (Cnsnews.com, May 21).

To be sure, China has long supported Pakistan’s nuclear and military programs to check Indian power. This deal is another sign of the Middle Kingdom's growing assertiveness in international affairs. For example, about a month before the sale to Pakistan, China reportedly announced the opening of a missile plant in Iran (The Straits Times, April 30). This missile plant, taken in tandem with China's growing nuclear exports, arguably betokens an expansion in China’s support for dubious states in the proliferation context (Asia Times Online, May 22). The flap over Burma’s nuclear ambitions is further cause for concern about risks for regional instability. There is no doubt that China’s overall foreign and defense policy has become generally assertive but there is more within the context of this deal than its growing assertiveness.

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

At the same time, China’s import and export activities reflect the growing global demand for nuclear power. The surge in demand for nuclear energy has several causes. Given the “oil shock” of the previous decade, even though prices have fallen 40-50 percent from their high in 2008, many states who lack hydrocarbon resources are searching for what they believe is a more stable, reliable, and domestically based source of energy in the face of expected recoveries of their domestic demand for energy. Another driver of demand for nuclear energy is the growing concern for the dangers of climate change brought on by profligate hydrocarbon use. Allegedly, nuclear energy—safely and properly used—represents less of a risk to the environment. China’s deal with Pakistan must also be viewed in the context of this heightened competition to export nuclear technology and the parallel-expansion in demand for it.

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

A new company should be formed later this year to support Japanese exports of nuclear power technology and knowledge. The Ministry of Economy Trade and Industry (Meti) has agreed to set up the firm with involvement from utilities the Tokyo, Chubu and Kansai electric power companies as well as with reactor vendors Toshiba, Hitachi and Mitsubishi Heavy Industries. The Innovation Network of Japan - a joint venture of government and industry - may also join. The move is seen as a reaction to South Korea's success in exporting to the United Arab Emirates and directed towards winning new nuclear contracts with the emerging nuclear countries of South-East Asia [7].

Not to be undone, Japan is now considering relaxing its restrictions on the export of nuclear technology, specifically to India (part of the larger dawning Indo-Japanese partnership due to the rise of China). These discussions reflect the forces driving the nuclear export and import in Asia. Since getting its waiver from the NSG India has concluded civil nuclear deals with the United States, France, Russia, and Kazakhstan.  India clearly wants to cement ties with Japan in this and other domains, and Japan, likewise, wants stronger ties with India and not to be 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 prepare the way for a reactor sale devoted strictly to peaceful purposes (Asahi Shimbun, May 3). Clearly, the pressure from South Korea is prompting Japan to gear up and compete in the exploding Asian market with its spiraling demand for electricity and all forms of power.

South Korea and Japan are hardly the only rivals in this field. France and the United States are long-standing purveyors of peaceful nuclear technology. Russia, since 2006 has been competing on a global scale for uranium sources and to see nuclear reactors across the globe. Moscow’s efforts in this field merit a separate analysis but it is a vigorous rival for these other Asian and Western exporters.

Therefore, China’s recent nuclear exports to Pakistan and the future of its nuclear exports in general need to be examined these three contexts. The first context is that of the overall growth of the assertiveness of China’s diplomacy in general and efforts to use nuclear power and military instruments like missiles as sources of influence abroad. In the case of exports to Pakistan, a second context is the long-standing geopolitical rivalry among India, China and Pakistan in which China’s “all-weather” friendship with Pakistan has been a deliberate and conscious Chinese strategy to inhibit the growth of Indian power. Finally, and third we must keep in mind that China is not only an exporter of nuclear energy, it also is a consumer of that energy and so it will be a key market for other exports like Russia, the United States, France, South Korea, and Japan. As an importer, it obviously will welcome the rivalry of exporters who wish to sell to it so that it can obtain more favorable terms. However, as an exporter of nuclear energy and a power that wants to export more of it for both economic and political gain, it cannot afford to let either its rivals outpace it in Asia or in other areas that China deems as essential to the pursuit 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.]