The Broad Mind | An Australian victory for India

The decision on Sunday by Australia’s ruling Labor Party to overturn a four-year-long ban on exporting uranium to India illustrates how foreign relations are governed in equal measure by business calculations and geostrategic computations. Australia’s Prime Minister, Julia Gillard, stressed the economic angle while campaigning for a policy turnaround on this issue. She convincingly argued that selling uranium to India would be “good for the Australian economy and for Australian jobs.”

The strategic aspect- containment of China- is certainly there in this development, but it is really a political economy story rather than a purely geopolitical one.

India, whose nuclear energy goals are ambitious and which already imports uranium from Australia’s competitors like Canada and Kazakhstan, was a market opportunity that was too good to bypass on political grounds.

Rivals of BHP and Rio have pointed fingers at an alleged secret understanding between these mining megaliths and the Gillard government on lifting the ban on uranium sales to India in return for paying a Minerals Resource Rent Tax (MRRT), which is expected to raise $11 billion in treasury revenues. MRRT has been a political hot potato in the past, but Gillard’s ability to carry long BHP and Rio to agree to pay the tax could reflect quid pro quos, including the sweetener of the Indian uranium market.

Once a nuclear safeguards agreement is executed between India and Australia and exports of uranium commence, the prime commercial beneficiaries would be gigantic mines such as Olympic Dam, operated by BHP. Since Gillard’s fragile coalition government came to office last year, the mining industry has been surging forward with regulatory clearances for expansion of existing sites. India’s uranium market is one component of this larger push for increasing mining’s already predominant footprint on the Australian economy.

With Australia, possessor of the world’s largest reserves of uranium, now carving out an exception for India, our nuclear plants will have ammunition to rev up electricity production to 100 percent capacity, hopefully delivering on their promise of mitigating the nation’s chronic power shortages through clean electricity sources.

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.