Thursday, January 12, 2006

Nuclear Proliferation and Moral Hazard

There's been a lot of goings-on concerning nuclear proliferation lately, and today is no exception. John Kerry backed a controversial deal by which the United States will allow India access to critical nuclear technology in exchange for India separating its civilian and military programs and placing the former under the watchful eye and controls of the International Atomic Energy Agency (IAEA). India has been something of a pariah in the international nuclear community since its rejection of the Nuclear Non-Proliferation Treaty in 1974 and its nuclear tests in 1974 and 1998. The deal struck by the Bush Administration, and now supported by Kerry, will bring India's civilian nuclear program into the global nuclear non-proliferation regime, meaning it will be subject to export controls, technology transfer agreements, and other controls designed to limit the spread of nuclear technology. In exchange, India will be granted access to other technologies, including fuel. Critics assert that this will enable India to increase its nuclear arsenal, as it will have a greater supply of nuclear fuel and will be able to divert more fissile material to its military program.

This deal is a classic example of a moral hazard, which is a situation in which dangerous behavior is encouraged when actors do not bear the full costs of their actions. The global non-proliferation regime was designed to provide peaceful nuclear technology to states that agreed not to develop nuclear weapons and to punish those states that would not cooperate. India did not, and has not cooperated. Why now should India be allowed access to the benefits that law-abiding states receive? According to Kerry, because "it is better to have India as a participant in the IAEA procedures and standards with respect to its civilian program than not to have it." So, India proliferates and still gets the benefits as if it hadn't. Why then should other countries not proliferate, knowing that they will likely be allowed IAEA benefits anyway (true, India was excluded from IAEA assets for three decades...but obviously that wasn't a sufficient deterrent)?

The answer as to whether this is a good idea or not hangs on the assessment of which other states are likely to respond to this incentive and proliferate. I don't believe that this is a big problem. "Rogue" states like Iran and North Korea are going to try to proliferate based on their assessments of national interest, and are not likely to respond to IAEA incentives, as evidenced by the current crises. Most status-quo states are not likely to want nuclear weapons anyway. They're expensive, dangerous, and not worth the time and effort. The lure of proliferating and still gaining access to IAEA assets will not likely convince these states to develop nuclear weapons.

That leaves us with states like India, Pakistan, and Israel, which, while not rogues, choose to exclude themselves from the non-proliferation regime and develop nuclear weapons to ensure their national security. While its true that perhaps other such states could be deterred by credible threats of exclusion and punishments, would the price of having nuclear programs existing outside of IAEA controls be worth it? How many other states are in situations such as Israel, India, and Pakistan, having legitimate security needs that can be responsibly met through nuclear proliferations. In this case, the Bush Administration, and now John Kerry, have made the right decision, acting to bring the Indian nuclear program under international controls at the (small) price of possibly encouraging a bit more proliferation in the future.

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