U.S. seeks way out of India nuclear deal impasse

VIENNA (Reuters) - The United States has told six nations its bid to lift a global ban on nuclear trade with India has stumbled over their objections and pressed them at a New Delhi meeting to give way, diplomats said on Friday.

Members of the 45-nation Nuclear Suppliers Group have balked at approving a waiver to its rules allowing business with India without conditions to help finalize Washington's 2005 civilian nuclear energy deal with New Delhi.

An August 21-22 NSG meeting ended inconclusively after the six nations, with at least tacit support of 15 more, sought changes to the U.S. waiver draft to ensure Indian access to nuclear markets would not indirectly benefit its atomic bomb program.

The U.S.-India deal has dismayed pro-disarmament nations and campaigners since India is outside the global Non-Proliferation Treaty and developed nuclear bombs in the 1970s with Western technology imported ostensibly for peaceful atomic energy.

Washington had been expected to rework the waiver draft for consideration at a second NSG meeting set for September 4-5 in Vienna. NSG decisions are reached by consensus.

"We have made it quite clear that we are interested in a clean waiver...," Foreign Minister Pranab Mukherjee told reporters in New Delhi on Friday. "We have presented our case. We have made our position clear to interlocutors".

Some analysts saw his statement as a softening of an earlier demand for an "clean, unconditional" waiver, which could bring billions of dollars in contracts for major nuclear exporters.

But diplomats, asking for anonymity due to political sensitivities, said the redrafting had run into Indian challenges and the U.S. envoy to New Delhi protested to the leading six NSG hardliners at a meeting on Thursday.

Washington was shocked and India felt betrayed by the unproductive NSG meeting 10 days ago, U.S. Ambassador David Mulford told envoys from New Zealand, Norway, Switzerland, Austria, Ireland and the Netherlands, the diplomats said.

As a result, Mulford said negotiations with India on proposed amendments to the draft were in serious difficulty and the whole effort could break down, the diplomats told Reuters.

"NON-PROLIFERATION BUREAUCRATS"

Mulford was quoted as saying "non-proliferation bureaucrats" in Vienna seemed out of touch with political leadership and if they were going to insist on "the gold standard of non-proliferation", there would be no waiver agreement.

But diplomats said the six were set on conditions including a trade halt in the event of another nuclear test, no transfers of fuel-enrichment or reprocessing technology that could be replicated for bomb production, and periodic waiver reviews.

India, with nuclear rival and fellow NPT outsider Pakistan as a neighbor, rejects any change that would end its right to test atomic bombs, even though U.S. legislation itself mandates a cut-off of trade with India if it tests weapons again.

Asked about the hold-up, U.S. State Department spokesman Robert Wood said on Friday Washington was still "reviewing ... next steps" with India on the NSG process and that it was possible the September 4-5 NSG conclave might need to be postponed.

Barring NSG action in early September, the U.S. Congress may run out of time for final ratification of the U.S.-India deal before it adjourns at the end of the month for autumn elections. That would leave the deal in indefinite limbo.

Washington and some allies assert the deal will shift India, the world's largest democracy, towards the non-proliferation mainstream and combat global warming by fostering use of low-polluting nuclear energy in developing economies.

Critics dispute the "mainstream" argument, saying India has not signed a test ban treaty unlike 179 other nations and, with a foreign supplies, could devote more of its limited indigenous resources, such as uranium ore, to expand its nuclear arsenal.

(Additional reporting by Bappa Majumdar in New Delhi and Sue Pleming in Washington; Editing by Dominic Evans)