Nuclear nations resume tough talks on India trade

VIENNA (Reuters) - Forty-five countries resumed crunch talks on Friday on whether to drop a ban on nuclear trade with India, amid efforts by Washington to allay fears the move could be at odds with non-proliferation principles.

Washington's talks with skeptics in the Nuclear Suppliers Group lasted well into the night after an NSG plenary meeting on Thursday failed to make a breakthrough despite U.S. revisions to the draft proposal drawn up two weeks ago.

Washington, scrambling to seal a U.S.-Indian atomic energy deal, was trying to push through a one-off waiver of NSG rules against doing business with states outside the Non-Proliferation Treaty (NPT) before the two-day NSG gathering ends on Friday.

Without an NSG accord, the U.S. Congress may run out of time to ratify the deal before it adjourns at the end of the month for elections, relegating the matter to an uncertain fate under a new president.

Diplomats said the outcome of the Vienna conclave remained unclear and another meeting might be needed. Decisions by the secretive nuclear export cartel must be unanimous.

"The overnight jaw-jawing perhaps made some progress with the skeptics but I'd bet against a result today," said a diplomat from a large country in the exclusive nuclear club, like others asking for anonymity due to political sensitivities.

"The consultations last night were very constructive but the red lines of each side do not meet yet. We'll see today," another nuclear diplomat told Reuters.

He said the extra discussions had not produced further revisions to the waiver draft sought by at least six smaller nuclear cartel member countries with some support from China.

They believe changes made to the draft do not sufficiently remove concerns that the U.S.-India deal could subvert treaties meant to stop the production or testing of nuclear weapons.

Washington's No. 3 diplomat, Undersecretary of State for Political Affairs William Burns, was sent to Vienna to head the U.S. delegation at the meeting, underscoring the mounting urgency for a lame-duck Bush administration to salvage the deal.

Burns told reporters on Thursday the negotiations were "making steady progress ... and will continue to make progress".

Washington and some allies assert the U.S.-India deal will move the world's largest democracy towards the non-proliferation mainstream and fight global warming by furthering the use of low-polluting nuclear energy in large developing economies.

NSG critics fear India could use access to nuclear material markets indirectly to boost its bomb program and drive nuclear rival and fellow NPT outsider Pakistan into another arms race.

To forestall this, they demanded clauses specifying no trade in the event of another nuclear test explosion, no transfers of fuel-enrichment technology that could be replicated for bomb-making, and periodic reviews of the waiver.

India has ruled out attaching conditions, such as a test ban, to an NSG exemption, as a threat to its strategic autonomy.

(Editing by Tim Pearce)