A policy update: Australian uranium export to India

December 2011

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Introduction

On 4 December 2011, Australia’s ruling Labor party voted to end the country’s ban on selling uranium to India, which means that Australia will be well-placed to feed India’s increasing appetite for uranium. India currently plans to build 63 nuclear power plants in addition to the 20 it already has in operation and to provide 25% of its electricity needs from nuclear power by 2025. This will result in India’s demand for uranium increasing significantly from the 1305 tonnes it required in 2011.

It is expected that exports from Australia to India will be made subject to stringent conditions, including strict adherence to International Atomic Energy Agency arrangements and strong bilateral undertakings and measures that will provide assurances that Australian uranium will be used only for peaceful purposes. Ultimately, the change in policy will mean that exports of uranium from Australia to India will become a reality leading to better relations and greater trade between the two countries, and a potential surge in investment from India.

Australian Uranium

Australia is the world’s third largest producer and exporter of uranium following Kazakhstan and Canada. Over the last ten years Australia has, on average, produced around 8,500 tonnes of uranium per year which was around 20 per cent of the world’s uranium production from 2000 to 20102. Australia has the world’s largest known reserves of uranium, amounting to some 23 per cent of the world’s total3.

Although Australia is a major uranium exporter it sells its uranium as ore or yellowcake. As a matter of policy Australia does not have any uranium enrichment plant, fuel fabrication facilities or nuclear power plant, save for its research reactor. There has been no indication that Australia will change its policy on enrichment plant or commercial nuclear plant in the near future4.

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International co-operation agreements

Australia has always been a strong supporter of the Non-proliferation Treaty (“NPT”) since its acceptance in 1973. It has often promoted the strengthening of the IAEA reporting requirements and was one of the first countries to sign the Model Protocol Additional To The Agreement(s) Between State(s) And The International Atomic Energy Agency For The Application Of Safeguards (known as the “Additional Protocol”) which strengthened the IAEA monitoring requirements.

In addition, Australia has for a long time been a strong partner to the US in developing non proliferation policy and has had a cooperation agreement in place since 19575. The United States has a number of similar agreements in place for civil nuclear cooperation, all of which are based on section 123 of the US Atomic Energy Act. These agreements are known as 123 Agreements and cover nuclear exports including uranium and often contain provisions on the prohibition of the transfer of sensitive nuclear technology including technology for the enrichment of uranium. Under the 123 Agreements some countries agree not to enrich at all whereas others agree not to enrich above twenty per cent.

In 2007 India signed a 123 Agreement with the United States6. This agreement governs co-operation of the United States and India on advancing India’s civilian nuclear industry. This agreement provides for the importation of nuclear materials into India (including source materials) and acknowledges India’s right to enrich to twenty per cent.

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The nuclear supplier's group

Australia is also a member of the Nuclear Suppliers Group (“NSG”). The NSG is a group of nuclear supplier countries that issues guidelines for nuclear exports and nuclear related exports. Notwithstanding the existence of the guidelines, decisions on export applications are taken at the national level in accordance with national export licensing requirements.

Broadly, the guidelines impose controls over the export of nuclear materials (including uranium) to countries that are not signatories to the NPT, including India.

However, following signature of the 123 Agreement with the United States and based on certain commitments and actions of India in the context of non proliferation and safeguarding, in September 2008 the NSG approved an exemption for India7  which opened up the importation of nuclear materials (including uranium) into India for peaceful purposes and for use in IAEA safeguarded civil nuclear facilities, provided that the importation satisfies a number of other provisions of the NSG guidelines.  Under the terms of the exemption India had agreed to separate its military and civil nuclear activities. The remainder of this briefing relates solely to civil nuclear activities.

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Safeguarding agreements

In 2009, India signed an Agreement between the Government of India and the IAEA for the Application of Safeguards to Civilian Nuclear Facilities (the “Indian Safeguarding Agreement”)8. This was the latest in a line of safeguarding agreements India has signed with the IAEA.

The Indian Safeguarding Agreement applies to a list of items which includes any nuclear material used in a nuclear facility declared by India to be subject to IAEA safeguarding or supplied pursuant to a bi-lateral or multilateral arrangement to which India is a party. Any exporter must satisfy itself that the yellowcake will be subject to the Indian Safeguarding Agreement.

The Indian Safeguarding Agreement places a number of obligations on India in respect of such nuclear material including:

  • India has to notify the Agency of the receipt of the nuclear material which will allow the IAEA to maintain an inventory of the nuclear material; and
  • no safeguarded nuclear material shall be transferred out of India until the IAEA has satisfied itself that on or more of the following conditions have been satisfied:
  • the material is being retuned unimproved to the state of origin; or
  • arrangements have been made with the IAEA to safeguard the material in the State to which it is being transferred9.
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Current Australian uranium export regulation

The export of uranium from Australia is currently regulated by the Customs (Prohibited Exports) Regulations 1958 (Cth). Regulation 9(3) prohibits the export of uranium unless prior permission in writing is granted by the Minister for Resources, Energy and Tourism (RET). Where such permission is granted, a Mineral Export Permit (MEP) is issued to the exporter on a conditional long-term basis and further approvals are required for each shipment.

A person wishing to export uranium from Australia must write to the Minster formally requesting approval, including information relating to the exporter’s background, source of material, proposed export quantity, arrangements and contract value. RET further requires the end user to submit a statement as to the ownership and operations of the end user, the intended use, disposal or re-export of Australian material and end user home governmental controls and arrangements.

As a signatory to the Nuclear Non-Proliferation Treaty (NPT), the current Australian government policy requires that:

  • uranium may only be exported for peaceful, civilian purposes under a network of bilateral safeguards agreements10providing for International Atomic Energy Agency (IAEA) safeguards;
  • recipient countries must be parties to the NPT (it is expected that an exception will be made for India);
  • where a recipient country is a nuclear weapon state under the NPT (ie. China, US, UK, Russia and France), assurances must be provided that the uranium will not be diverted to non-peaceful uses and the IAEA safeguards must be accepted;
  • clearance must be given by the Australian Safeguards and Non-Proliferation Office before an MEP may be issued.
  • recipient countries that are non-nuclear weapon states must have an Additional Protocol that ensures the IAEA has access to and inspection rights in the recipient country.
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Federal labor party policy

The source of the Australian Government ban on the export of uranium was contained in the Australian Labor Party’s (ALP’s) National Platform, which provided that Australian-mined uranium be “used only for civil purposes by approved instrumentalities in approved countries which are signatories to the NPT and with whom Australia has safeguard arrangements”.

On 15 November 2011 Prime Minister Julia Gillard stated her intentions to push for the change in policy as India is Australia’s fourth biggest export market worth $16 billion to the Australian economy, was poised to increase its use of nuclear power from 3 to 40 per cent by 2050. At the ALP conference on 4 December, the ALP voted to overturn that policy against exports of uranium to India. The policy change was supported by the Foreign Minister (and recent former Prime Minister), Kevin Rudd, who previously overturned the conservative government’s 2007 decision to allow exports of uranium to India.

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Further negotiation required

Now that the policy has changed, the next step will be for Australia and India to negotiate a bi-lateral safeguards treaty. The Prime Minister stated that Australia would apply the same standards to India as it does to all countries to which it exports uranium, including "strict adherence to International Atomic Energy Agency arrangements and strong bilateral undertakings and transparency measures that will provide assurances our uranium will be used only for peaceful purposes." Therefore, it may take some time before the bi-lateral safeguards treaty between India and Australia can be finalised.

Once a bi-lateral safeguards treaty has been executed, licensed uranium exporters will be able to export to Indian customers, provided that:

  • both Australia and India will need to fulfil their reporting requirements (usually undertaken by the entity exporting the nuclear material with the support of the local regulators) to the IAEA; and
  • any transporter will need to comply with the relevant procedures, principles and treaties governing the transportation of nuclear materials.
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Conclusion

The lifting of Australia’s ban on uranium exports to India is encouraging both from an export and investment perspective. The lifting of the ban on exports of uranium to India would:

  • provide an opportunity for Indian customers to commence negotiations for sale and purchase agreements for Australian uranium with licensed exporters; and
  • encourage investment in Australian uranium mining projects.

However, it will take more time before the necessary bi-lateral arrangements are in place so that sales of Australian uranium to India can become a reality.

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Footnotes

  1. World Nuclear Association figures
  2. World Nuclear Association production figures
  3. World Nuclear Association production figures
  4. At the 2010 NPT Review Conference a representative from Australia stated “Australia does not consider it necessary or desirable for each state with a nuclear program to develop national enrichment or reprocessing facilities … it would be a perverse outcome form the standpoint of international security to see a proliferation of national fuel cycle facilities”. (Statement to the Main Committee III regarding the IAEA Peaceful Uses Initiative, as part of the 2010 Review Conference as delivered on 10 May 2010 and quoted in the US Report for Congress dated 1 December 2010)
  5. Australia currently sells around 36 per cent of its uranium exports to the United States
  6. The Agreement for Cooperation between the Government of the United States of America and the Government of India Concerning Peaceful Uses of Nuclear Energy
  7. See INFCIRC/734(Corrected)
  8. See INFCIRC/754
  9. It should be noted that these provisions have been paraphrased and do not contain all the provisions set out in the Indian Safeguarding Agreement.
  10. Australia currently has 22 bilaterial safeguards agreements in place with 39 countries.
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