Despite not signing the nuclear non-proliferation treaty, India will be allowed to import uranium from Australia for civilian purposes.
On Sunday the two countries finalized a deal that has been in the works for three years, with Indian Prime Minister Modi and Australian PM Malcolm Turnbull making statements on the sidelines of the G20 summit in Turkey and on social media.
“PM @narendramodi thanked PM @TurnbullMalcolm and described the nuclear agreement as a milestone & source of trust & confidence,” tweeted Vikas Swarup, from the Indian foreign ministry. “With the completion of procedures, including administrative arrangements, the #IndiaAustralia Civil Nuclear Agreement will enter into force.”
The seeds of the agreement were sown by then-Australian PM Julia Gillard, who promised during a state visit in 2012 to supply uranium to India, which faces severe shortages of electricity and has limited nuclear capacity. Two years later Gillard’s successor, Tony Abbott, signed a memorandum of understanding for “Cooperation in the Peaceful Uses of Nuclear Energy” whereby Australia would become a long-term supplier of uranium to India.
The agreement means India is the first country to buy yellowcake from Australia, that has not signed the international treaty to prevent the spread of nuclear weapons.
While India faced Western sanctions in 1998 after testing nuclear weapons, the sanctions were lifted after a deal with the United States in 2008 that included safeguards against using the nuclear fuel for weapons production.
According to the World Nuclear Association, India currently has 21 operating reactors with a capacity of 4,780 megawatts, or 2 percent of India’s total power supply. The country plans to increase its nuclear capacity to 63,000 MW by 2032, by adding close to 30 reactors at a cost of $85 billion, Hindustan Times reported.
India is actively seeking agreements with foreign powers in order to reach that goal, on top of the nuclear agreements it currently has with 11 countries and deals to import uranium from Russia, France, Kazakhstan and Canada.
Concerned about running out of nuclear fuel, in July India created a strategic uranium reserve to ensure that its atomic reactors can keep producing electricity without interruption.
The finalized supply deal with Australia could be quite lucrative for Australian uranium producers and uranium mines, which include BHP Billiton’s (NYSE:BHP) Olympic Dam, Ranger, Beverley, Four Mile and Honeymoon.
An Australian parliamentary committee that supported the deal said in September the arrangement could increase export revenues by $1.75 billion.
Mark Chalmers, chair of the Australian Uranium Council, told ABC News that Australia could double or triple its uranium production to meet India’s needs, although for that to happen, the price of uranium would have to almost double, he added.
Australia currently has about 40 percent of the world’s uranium reserves, and is the number three producer of the nuclear fuel, behind Kazakhstan and Canada.