Bloomberg News

Gillard Calls for Uranium Exports to India in Policy Shift

November 15, 2011

(Updates with Indian comment in ninth paragraph.)

Nov. 15 (Bloomberg) -- Prime Minister Julia Gillard is seeking to overturn a ban on Australian uranium exports to India, risking a battle with her Labor Party and the Greens as she tries to strengthen diplomatic ties and boost the economy.

“Selling uranium to India will be good for the Australian economy and good for Australian jobs,” Gillard told reporters in Canberra today. She called on Labor members to back the policy shift at the party’s national conference next month.

Australia, holder of the biggest known uranium reserves, blocks exports of the fuel to India because the South Asian nation hasn’t signed the Nuclear Non-Proliferation Treaty. Allowing shipments would help repair relations with the key trade ally and open a new market for producers including Energy Resources of Australia Ltd., controlled by Rio Tinto Group, and BHP Billiton Ltd., which already supply China.

Gillard’s proposal may also boost the government’s relations with the mining industry after it introduced legislation this month for a 30 percent tax on coal and iron-ore profits and passed a law to make polluters pay for their carbon emissions. The Greens, which the minority government relies on to pass legislation, condemned the proposed shift, saying the nation’s foreign policy was being dictated by mining interests.

BHP dropped 1.7 percent to A$36.88 at the close in Sydney, compared with a 0.4 percent decline for the benchmark S&P/ASX 200 Index. Rio fell 1.2 percent, while Energy Resources slipped 2.8 percent. Deep Yellow Ltd., a uranium exploration company with licenses in the Northern Territory, gained 28 percent and Toro Energy Ltd. advanced 10 percent.

‘Growing Market’

“India is a growing market, there’s no doubt about that,” Tim Schroeders, who helps manage about $1 billion in equities at Pengana Capital Ltd. in Melbourne, said by phone. “But there’s a long way to go and the uranium market at the moment is probably in oversupply.”

India has signed civil nuclear agreements with countries including the U.S., Russia and France after a three-decade ban on supplies to the country was lifted in September 2008 by the 45-member Nuclear Suppliers Group.

Two-way trade between Australia and India reached A$18.4 billion in 2010, according to the statistics bureau. Uranium exports are expected to have been A$960 million in the year ended June 30, 2011, according to Australian government data.

“We welcome the Australian prime minister’s remarks and are looking forward to further steps in this direction materializing into exports of uranium to India,” S.K. Jain, chairman of Nuclear Power Corp. of India Ltd. said in a phone interview. “We expect members of the Nuclear Suppliers Group to offer cooperation to us, acknowledging our stand on issues such as the Nuclear Non-Proliferation Treaty.”

Obama Visit

Lifting the ban would bring Australia’s policy in line with that of the U.S., which has a civil nuclear accord with India. Jeffrey Bleich, the U.S. ambassador to Australia, last week warned the ban could hinder efforts to establish a three-way economic and security pact with India, the Australian Financial Review reported.

Gillard said the timing of her announcement was unconnected to the arrival tomorrow of U.S. President Barack Obama in Australia for a visit that will mark the 60th anniversary of the alliance between the two nations.

The prime minister will “meet quite a lot of resistance” among Labor members, said Michael McKinley, a lecturer in international relations at the Australian National University in Canberra.

Lifting the ban probably wouldn’t require legislation, McKinley said by telephone. Regardless, the opposition Liberal- National coalition would likely support any bill in parliament, he said.

Olympic Dam Mine

Australia is the third-largest producer of the nuclear fuel behind Kazakhstan and Canada. BHP last month approved spending $1.2 billion for initial work on a proposed expansion of the Olympic Dam project in Australia that would make it the world’s largest uranium mine.

“BHP would benefit the most from” Australia starting uranium exports to India, with the Olympic Dam mine being the prime beneficiary, Ray Chantry, a resources analyst at EL&C Baillieu Stockbroking Ltd. in Melbourne, said by phone. “To move that amount of uranium, you either need to sell it to China or to India.”

BHP, which currently sells uranium products to Japan and China, will review its export strategy should the ban be lifted, spokeswoman Fiona Martin said by phone from Melbourne.

‘Appropriate Safeguards’

“If the government changes its policy in relation to uranium sales to India and it ensures the appropriate safeguards are in place, BHP Billiton will review its position and take those matters into consideration,” she said.

Rio operates the world’s second- and third-largest uranium mines, representing about 16 percent of global supply, through its 68 percent-owned Energy Resources of Australia and 69 percent-owned Rossing Uranium Ltd. in Namibia. Energy Resources currently exports uranium to power utilities in Japan, South Korea, China, Europe and North America.

Prime Minister Manmohan Singh plans to build atomic power stations to reduce dependence on coal-fired generation and reduce blackouts in the nation. The International Energy Agency estimates India’s energy demand may more than double by 2030 from 2007 levels.

--With assistance from Soraya Permatasari in Melbourne, Elisabeth Behrmann, James Paton and Daniel Petrie in Sydney and Rajesh Kumar Singh in New Delhi. Editors: Edward Johnson, Andrew Hobbs

To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: Edward Johnson at ejohnson28@bloomberg.net


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