Phone call derails controversial deal to attract India into nuclear fold

India has officially informed the United States that it has frozen a nuclear deal that was supposed to herald a strategic alliance between the biggest democracy in the world and the richest.

Manmohan Singh, the Prime Minister, telephoned President Bush on Monday night to tell him that the deal had run into difficulties because of opposition from his communist allies. “The Prime Minister explained to President Bush that difficulties have arisen with respect to operationalisation of the India-US civil nuclear co-operation agreement,” the Indian Government said.

The Americans said that they would continue to work on the deal but analysts and diplomats said it would not be ready for approval by the US Congress before the end of the Bush Administration. “It’s over. The Americans are distraught,” one Western diplomat told The Times. “The embassy has been working on little else for two years.” The deal’s failure is a huge embarrassment for Mr Singh, who gave it his personal backing, and for Mr Bush, who was hoping it would be a foreign policy success.

The agreement, announced with a fanfare last year, would have allowed India to import US nuclear fuel and technology for the first time in 30 years, easing its energy shortage and binding it closer to Washington. India — which leant towards the Soviet Union during the Cold War — would have had to open some of its nuclear facilities to international inspections. The communists who back India’s ruling coalition said that the deal would make India subservient to US interests. They threatened to withdraw their support, forcing early elections if the Government triggered the deal by opening negotiations with the International Atomic Energy Agency.

Mr Singh appeared determined to call the communists’ bluff until Friday, when he backtracked and said that his priority was to see out the Government’s term, which ends in 2009.

Sources in his Congress Party, which leads the ruling coalition, said that party pollsters had balked at the prospect of elections early next year.

The Government had aimed to conclude the IAEA pact by the end of this month so it could win approval from the Nuclear Suppliers Group in time for the US Congress to endorse the deal before the end of the year.

Any later would mean that a lame-duck Bush Administration would struggle to get the deal through a hostile Congress preoccupied with the presidential election. Some US politicians have said that it undermined efforts to combat the spread of nuclear weapons. Others fear it would allow India to divert nuclear materials, beginning an atomic arms race in Asia.