The recent approval of Holtec International to transfer Small Modular Reactor (SMR) technology to India has ignited significant debate regarding regional security dynamics in South Asia. This landmark decision, which effectively revives the long-stalled Indo-US Civil Nuclear Agreement, represents a major shift in nuclear cooperation between the United States and India. While proponents view this as a strategic partnership advancing clean energy goals, critics—particularly in Pakistan—have expressed serious concerns about regional stability, nuclear security, and geopolitical implications. This report examines the facts surrounding the deal, analyses security concerns from multiple perspectives, and evaluates the broader impact on South Asian strategic balance.

Background And Details of The US-India Nuclear Deal

On March 26, 2025, the US Department of Energy granted approval to Holtec International, a leading global nuclear technology company, to transfer small modular reactor (SMR) technology to India. This milestone development enables Holtec to collaborate with its regional subsidiary Holtec Asia, along with Indian companies Larsen & Toubro Ltd and Tata Consulting Engineers Ltd to share "unclassified small modular reactor technology". The approval comes with specific limitations—notably that the jointly developed nuclear technology cannot be transferred to other Indian entities or third countries without explicit US government consent.

The Holtec deal effectively breathes new life into the Indo-US Civil Nuclear Agreement (commonly known as the 123 Agreement) that was originally signed in 2007 by then-Prime Minister Manmohan Singh and President George W. Bush. Despite its initial promise, the agreement faced significant implementation delays spanning nearly two decades due to various legal and regulatory challenges. During this period, the nuclear cooperation between the two countries remained largely theoretical rather than practical.

Small Modular Reactors represent an emerging nuclear technology designed to provide scalable, flexible power generation with enhanced safety features compared to traditional large nuclear plants. Their compact size makes them suitable for regions with limited infrastructure, while their modular nature allows for incremental capacity additions. This technology transfer signals a significant evolution in US-India energy cooperation and reflects Washington's growing strategic alignment with New Delhi.

Strategic Context of Nuclear Cooperation

The Council on Foreign Relations has identified that US interests in South Asia, while "not vital," are "important and increasing," encompassing goals such as preventing major war, limiting nuclear proliferation, expanding economic ties, and promoting democratic institutions. The post-Cold War environment has created opportunities for substantial improvement in bilateral relations between Washington and both New Delhi and Islamabad. However, realizing these opportunities requires "more creative thinking and skilful diplomacy than has been the norm".

US policy experts have advocated for expanding bilateral economic, political, and military ties with both India and Pakistan simultaneously, arguing that it is "both possible and desirable to delink the two bilateral relationships and transcend the zero-sum dynamics that have often plagued the region". Particularly regarding India, policy recommendations include acknowledging India's "growing power and importance," maintaining high-level diplomatic engagement, loosening constraints on dual-use technology transfers, increasing military cooperation, and supporting India's inclusion in regional institutions.

Pakistan's Security Concerns And Regional Implications

Pakistan has expressed alarm over the US-India nuclear deal, framing it as a destabilizing development that threatens regional security equilibrium. The concerns articulated from Islamabad centre around several key issues that merit careful examination.

Balance of Power Considerations

From Pakistan's perspective, the technology transfer represents a potential shift in the strategic balance of the region. Critics in Pakistan view the SMR deal as further evidence that Washington is prioritizing its strategic partnership with India at Pakistan's expense, particularly as part of a broader containment strategy directed at China. This perception is reinforced by the absence of similar nuclear cooperation offers to Pakistan, which has historically sought nuclear parity with India.

The development occurs against the backdrop of South Asia's nuclear history, where both India and Pakistan emerged as de facto nuclear weapons states despite international non-proliferation efforts. US policy experts have acknowledged that reversing these countries' nuclear status is "extremely unlikely" and have suggested focusing instead on "establishing a more stable and sustainable plateau for Indian and Pakistani nuclear relations". This would include urging both nations to refrain from nuclear testing, weapons deployment, and export of sensitive technologies.

Nuclear Security Concerns

Critics of the deal point to alleged incidents of nuclear material theft and security lapses in India to question whether expanding India's nuclear capabilities is prudent. According to Pakistani sources, there have been multiple incidents involving radioactive materials falling into unauthorized hands in India. One recent case reported by The Express Tribune involved the arrest of three individuals in Bihar's Gopalganj district who were found in possession of 50 grams of suspected radioactive Californium. The article claims this is "not an isolated case" and refers to "multiple incidents of theft and illegal sale of nuclear and radioactive materials in India".

However, it's important to note that allegations regarding India's nuclear security need to be evaluated carefully, considering the sources. Some outlets reporting these incidents, such as Kashmir Media Service (KMS), have been characterised as propaganda tools operating from Pakistan that disseminate misinformation about India rather than legitimate media sources. The KMS has been identified as "a mouthpiece of the separatist camp in Kashmir" that "strongly presents the viewpoint of the Pakistanis and the separatists".

Geopolitical Dimensions And Strategic Alignment

The US-India nuclear deal must be viewed within the broader context of evolving geopolitical dynamics in the Indo-Pacific region. The growing strategic partnership between Washington and New Delhi reflects shared concerns about China's expanding influence and assertiveness across Asia.

US Strategic Calculations

For the United States, the SMR technology transfer serves multiple strategic objectives. First, it strengthens ties with India, which US policy experts consider to have "the potential to emerge as a full-fledged major power". Second, it potentially opens significant commercial opportunities for US nuclear technology firms in one of the world's largest energy markets. Third, it positions the US as a counterbalance to Chinese and Russian nuclear technology exports, which have been gaining ground globally.

The US approach appears aligned with policy recommendations to "propose a closer strategic relationship with India" based on "shared values and institutions, economic collaboration including enhanced trade and investment, and the goal of regional stability across Asia". This cooperation extends beyond nuclear technology to encompass defence partnerships, maritime security, and economic integration initiatives.

China's Perspective

From Beijing's viewpoint, the expanding US-India partnership—including nuclear cooperation—represents a concerning development in what China perceives as Washington's containment strategy. China has historically maintained close ties with Pakistan as a strategic counterweight to India, including assistance with Pakistan's nuclear and missile programs. The Holtec deal potentially accelerates this dynamic, reinforcing China's incentives to deepen its partnership with Pakistan.

Balancing Energy Needs With Non-proliferation Goals

The Holtec SMR deal highlights the complex challenge of balancing legitimate energy development needs with non-proliferation objectives. India, with its massive population and growing economy, faces substantial energy demands that clean nuclear power could help address. At the same time, the international community maintains valid concerns about nuclear proliferation in a historically volatile region.

Energy Security Considerations

Small Modular Reactors offer several potential advantages for India's energy landscape. They can supplement renewable energy sources, providing reliable baseload power with fewer emissions than fossil fuel alternatives. Their smaller size and modular nature allow for more flexible deployment and potentially reduced upfront capital costs compared to large conventional nuclear plants. For a country working to meet Paris Climate Agreement targets while supporting economic growth, SMRs represent a valuable technological option.

Non-Proliferation Frameworks

The US-India nuclear cooperation has been controversial from a non-proliferation perspective since its inception. India never signed the Nuclear Non-Proliferation Treaty (NPT), conducted nuclear tests in 1974 and 1998, and developed an independent nuclear weapons program outside international safeguards. The 2007 agreement represented an exception to longstanding US non-proliferation policy, justified on grounds of India's responsible nuclear behaviour and strategic importance.

The Holtec deal includes important safeguards, notably the restriction preventing technology transfer to third parties without US consent. This limitation reflects ongoing non-proliferation concerns while enabling controlled cooperation. However, critics maintain that such arrangements undermine the global non-proliferation regime by rewarding a state that developed nuclear weapons outside the NPT framework.

Conclusion

The US approval for Holtec International to transfer SMR technology to India marks a significant evolution in bilateral relations and South Asian security dynamics. While representing a potential advancement in clean energy development, the deal raises legitimate questions about regional strategic balance, nuclear security, and non-proliferation objectives.

For Pakistan, the development reinforces perceptions of strategic isolation and US favouritism toward India. These concerns merit thoughtful consideration within a broader diplomatic framework that addresses regional security holistically. US policy experts have recommended that Washington should "significantly expand its bilateral economic, political, and military ties with India and Pakistan simultaneously", suggesting that a zero-sum approach is neither necessary nor beneficial.

As the deal moves forward, key challenges remain: ensuring robust nuclear security measures, preventing regional arms racing, promoting Indo-Pakistani dialogue, and maintaining appropriate nuclear safeguards. The successful navigation of these challenges will determine whether the US-India nuclear partnership contributes to regional stability or exacerbates existing tensions in an already complex security environment.

IDN