Tag: Australia

SYDNEY (TIP): Virgin took full control of budget carrier Tigerair Australia, buying the remaining 40 percent it did not already own for Aus$1 (88 US cents) from its Singaporelisted parent. The deal was revealed as it was announced that Singapore Airlines (SIA) would take majority control of Tiger Airways, of which Tigerair Australia was a subsidiary, as part of a turnaround plan for the loss-making budget firm.

Virgin Australia purchased a 60 percent stake in Tigerair in mid-2013 for Aus$35 million and said agreement had been reached to buy the rest of the carrier, which has struggled to reach profitability, for the tiny sum. Tiger will continue to license its brand to Virgin. Virgin Australia chief John Borghetti said the acquisition would allow it to fly to a number of new short-haul international destinations, providing growth opportunities for the business, while accelerating Tigerair’s drive for profitability. “Given the ongoing subdued consumer demand in the Australian domestic market, the growth of the Tigerair Australia domestic fleet is likely to be reduced,” he said.

“Under this proposed transaction, we will benefit from the economies of scale and achieve profitability ahead of schedule by the end of 2016, by leveraging the resources of the wider Virgin Australia Group.” In Singapore, Tiger Airways said SIA would convert its “perpetual convertible capital securities holdings” in the carrier into shares, raising its stake to 55 percent from 40 percent. It said the move would effectively make Tiger Airways a subsidiary of SIA, which also operates a long-haul budget unit called Scoot. Tiger Airways also said it will separately raise Sg$234 million (US$184 million) in a rights issue that will be mostly subscribed by SIA. The rights issue will be carried out after SIA increases its stake.

Tiger has been struggling to make money owing to tough competition in the booming Southeast Asian budget carrier market, which is dominated by Malaysia’s AirAsia and Singapore-based Jetstar Asia. Earlier this year, it sold its entire 40 percent stake in Tigerair Philippines to rival Cebu Pacific, and in July, its joint venture in Indonesia’s PT Mandala Airlines ceased operations owing to losses. The Tigerair Australia move, which is subject to Foreign Investment Review Board approval, comes after a difficult 12 months for Australian airlines as intense battle for market share saw both Virgin and Qantas suffer heavy losses. Virgin posted a full-year net loss of Aus$355 million, while Qantas suffered a record loss of Aus$2.8 billion.

During his visit to India this week, Australia’s Prime Minister Tony Abbott is expected to sign a deal to sell Australian uranium that will be the singlemost significant advance in bilateral relations with India in decades. The journey to get to this point has been tortuous and the controversy is unlikely to fade anytime soon. The main impetus for the change in Australia’s policy came from geopolitical changes and the increased importance of the bilateral relationship with India, rather than commercial calculations.

Nuclear energy is used by about 30 countries to generate 11 per cent of the world’s electricity, with almost zero greenhouse gas emissions. Currently there are 437 operating reactors and around 70 under construction. Nuclear energy is tipped to grow between 23-100 per cent by 2030 (the long-term impact of the 2011 Fukushima disaster remains impossible to predict with certainty, hence the wide range in the estimates).

Most of the growth in nuclear energy will be in Asia (China, India, Indonesia, Malaysia, Pakistan, Thailand and Vietnam). The world’s current total requirement for uranium is 66,000 tonnes. The biggest users are the US (18,800 tonnes) and France (9,900 tonnes). India’s uranium requirement is 900 tonnes, compared to 6,300 tonnes for China and 5,500 tonnes for Russia. In Asia, the other big uranium consumers are South Korea (5,000 tonnes) where nuclear energy accounts for 28 per cent of electricity generation, and Japan (2,100 tonnes in 2014) where nuclear energy produced 29 per cent of electricity before the Fukushima accident in March 2011 but has fallen to below 2 per cent.

Australia holds 31 per cent of the world’s uranium reserves but its share of the global uranium market is only 12 per cent. The policy framework for the export of Australian uranium was set in the 1970s. The Non- Proliferation Treaty (NPT) obligates Australia to facilitate the peaceful uses of nuclear energy, but uranium sales would be restricted to countries that could satisfy Canberra it would not be diverted to non-civilian purposes. For this, recipients had to be in good nonproliferation standing and conclude a bilateral safeguards agreement to account for the use of Australian uranium and any nuclear material produced from it.

Enrichment process

Uranium processed at Australian mines must go through three more processes (conversion, enrichment, fuel fabrication) before it can be used in a nuclear reactor. The high-energy density of uranium fuel means that a 1,000 MW nuclear reactor requires 27 tonnes of fresh fuel each year, compared to a coal power station that requires more than 2.5 million tonnes of coal to produce equivalent electricity.

There are, thus, clear environmental benefits of adding nuclear fuel to the portfolio of energy grids. Uranium enriched to between 3-4 per cent for civilian uses cannot be used in a nuclear weapon, which requires enrichment to 80-90 per cent. Thus, it is not too difficult to put in place safeguards measures against diversion for non-civilian uses. The Howard Government (1996-2007) announced in-principle willingness to sell uranium to China, Russia and India.

The Labor Government (2007-13) insisted that ‘good nonproliferation standing’ meant being party to the NPT. Accordingly, negotiations were successfully concluded with China in 2008 and Russia in 2010 as both were NPT States Parties, but not with India, which from the start has rejected the NPT as fostering a world of “nuclear apartheid”: those that have nuclear weapons and can keep them, and others that must be stopped from getting them by any means necessary.

Following the 2008 India-US civil nuclear cooperation deal, the Labor Government joined Washington in the India-specific waiver by the Nuclear Suppliers Group. But this left it with an illogical and untenable policy of supporting open access to global nuclear trade for India but not selling it Australian uranium. The Bush administration’s position, ultimately accepted by Australia and many other supplier countries, was that there were significant nonproliferation benefits of bringing India inside the tent of safeguarded nuclear commerce and export controls, that putting most of its nuclear reactors under international safeguards was better than having none under such controls, and that all evidence pointed to the conclusion that its nuclear weapons programme would continue regardless of international civil cooperation.

These international advances were complemented by an Indian statement in 2008 reaffirming its “impeccable non-proliferation record” and credentials, highlighting its strengthened domestic and export controls, its posture of restraint on nuclear weapons doctrine and deployment (including no first use), the ‘voluntary, unilateral moratorium’ on nuclear testing, openness to a fissile materials cut-off treaty, and continued support for total nuclear abolition through a universal nuclear weapons convention. Australia’s uranium recalcitrance became a major hindrance to the broader bilateral relationship. The oddity of selling uranium to China and Russia was also questioned.

As a responsible uranium exporter, Australia has to satisfy itself about the safety record and risks of reactors in the recipient countries; the security of materials and facilities against theft, leakage and raids; the adequacy of safeguards against diversion to non-civilian uses, such as making nuclear weapons; and proliferation risks. There are also not insignificant issues of safe nuclear waste disposal, as shown by the controversy over Muckaty in Australia’s Northern Territory that was touted as a possible repository but the indigenous community
living there vigorously resisted.

Like China and Russia, India operates nuclear reactors for both peaceful purposes and military uses. Those designated as civilian are subject to international safeguards under IAEA oversight, while those classified as military are not. In the past, the world has had greater worries about the security of nuclear materials and facilities in Russia – the problem of the so-called loose nukes – than in India. And India’s record of proliferation to third-world countries is superior to China’s past complicity in the proliferation of materials and designs to North Korea and Pakistan (remember A.Q. Khan’s global nuclear bazaar?).

Getting it wrong

Bilateral problems in the recent past between India and Australia have included on and offfield controversies in cricket, attacks on Indian students, and the occasional assaults on Australian tourists and missionaries in India. The noisy media in both countries can inflame popular passions and prejudices and complicate government-to-government relations.

The most consequential mutual misperceptions arose from the failure to understand each other’s nuclear policy underpinnings and imperatives. Each side was firmly convinced of its own intellectual and moral rectitude and smugly contemptuous of the other. Australia held India to have been deceitful in conducting a nuclear test in 1974 and a stubborn recalcitrant on the Comprehensive Nuclear-Test-Ban Treaty (CTBT), in the passage of which Canberra played a key role in 1996.

India considered countries like Australia and Canada to be grossly hypocritical in having permitted British atomic tests on their territory, sheltering under the US nuclear umbrella, hosting US military installations that are tightly integrated in the global US nuclear infrastructure and deeply implicated in global US nuclear doctrines and deployments, yet moralising self-righteously to India about the virtue of nuclear weapons abstinence. Three drivers of the shifting global order are the re-emergence of China and India as major nodes of global activity and the relative US decline from dominance.

All three trends were reflected in the India-US nuclear deal that left Australia trapped between legacy national policy and a shifting global geopolitical-cumnormative order.When Canberra cancelled the quadrilateral security dialogue among the four great democracies of Australia, India, Japan and the US in 2008, the quixotic nature of Australian policy was confirmed for many Indians amid suspicion that Mandarinspeaking Prime Minister Kevin Rudd was merely betraying his China leanings.

Yet, the public debate over the rise of China, its rapid military modernisation and what this means for Australia’s defence planning, reveals considerable differences of opinion. Against these larger considerations of bilateral relations with a democratic India across the Indian Ocean at a time when assertive Chinese visibility and activity is growing in the East and South China Seas, the anticipated economic gains from uranium sales are modest. Compared to the A$63bn iron ore export industry, for example, uranium exports are worth only $1bn and the most optimistic projections would see the rise restricted to under $2bn. Asia will provide most of the market growth opportunity for uranium in the foreseeable future. Australia has the advantages of proximity to this growing market.

The bilateral agreements with China and India mean that Australia is already covering one-third of the world’s population and has been given access to the two big growth-potential markets. The world price of uranium has been depressed for some time and the finalisation of the India deal could give it a boost to incentivise uranium exploration and production. While the fear of losing market share in the long run to competitors might be a relevant commercial consideration, the changed Australian policy is more persuasively attributable to adjustments to changed geopolitical circumstances and efforts to consolidate and deepen bilateral relations with one of the key emerging powers of this century that will matter greatly to Australia both economically and geopolitically.

Strategic interests

In an extraordinary fact considering their reciprocal importance and cross-ocean proximity, the last Indian PM to visit was Rajiv Gandhi in 1986. Prime Minister Modi will not only attend the G-20 summit in Brisbane in November; he will add an official bilateral visit to Australia to the itinerary. India and Australia have a shared strategic interest in a stable Indo-Pacific Asia that links them also to Indonesia and South Africa around the Indian Ocean rim: Perth is closer to Chennai than Melbourne, Sydney or Brisbane are to Seoul, Tokyo and Beijing.

They can be policy and operational partners in combating piracy, ameliorating climate change, and providing disaster relief; and fighting the scourge of international terrorism and Islamic fundamentalism. There are deepening trade, security, cultural, and educational ties. Bilateral trade could grow substantially with more policy clarity in India, deeper liberalisation, deregulation and privatisation, and less regulatory ambiguity and corruption. Indian investors in Australia are impressed by the transparency of doing business here and the absence of official and public suspicions that add hurdles to Chinese investment proposals in Australia.

There is considerable scope for a tighter defence and strategic partnership without a formal alliance. There is equally great scope for market efficiencies in consolidation of mining exploration, extraction and processing; engineering and construction services; and skills training and educational exchanges: Australia is a global education powerhouse and the world’s third most popular international student destination after the US and UK. India is also the current largest source of immigrants. In sum, the uranium deal could potentially provide considerable ballast to the bilateral relationship.

(The author is Director of the Centre for Nuclear Non-proliferation and Disarmament (CNND) in the Crawford School, Australian National University and Adjunct Professor in the Institute of Ethics, Governance and Law at Griffith University. He was Vice Rector and Senior Vice Rector of the United Nations University (and Assistant Secretary-General of the United Nations) from 1998-2007. He can be reached at ramesh.thakur@anu.edu.au)

British English (Source: Tribune, Chandigarh)