I am attaching to this letter a copy? of the draft text which officials in Ottawa consider might serve as a basis for negotiating with the Indian Government the formal agreement for the Canada- India reactor project. Many parts of this text were discussed with Dr. Bhabha when he was in Ottawa and the general financial arrangements have already been established in the exchange of letters between Dr. Bhabha and the Assistant Deputy Minister of Finance.

2. Section 10 of this draft text which concerns the provision of fuel was not discussed with Dr. Bhabha, who as you are aware, rejected the Canadian suggestion that fuel should be provided on a lease basis. You are familiar with the discussions which took place between the Minister and Dr. Bhabha in New Delhi last month. The formula suggested in Section 10 of the draft text has been approved by Cabinet.

3. A draft agreement along the lines of the attached text is likely to be presented to the Indians in the near future. Since the formal inauguration of the project is scheduled to take place in early February, it is obviously highly desirable that formal agreement or near agreement should have been reached before that time. However, before presenting this text to India, officials in Ottawa think it may be preferable to wait until there has been a further opportunity for Canada, the United States and the United Kingdom to discuss more thoroughly the problems involved in the control of fissile materials in preparation for the forthcoming twelve power meeting. It is, therefore, our intention to withhold presenting this agreement for the moment to the Indian Government unless it appears that no effective and relevant discussions are likely to materialize in the next few weeks. At the least, we would, of course, inform the United States and the United Kingdom Governments of how we were proposing to deal with the fuel issue but we are not entirely sure at what stage we should speak to them. We would welcome your comments on this aspect.

4. In the meantime, however, I should welcome your comments in connection with this text, bearing in mind that the formula concerning the provision of fuel has been approved by Cabinet. The other parts of the text have also been initially reviewed by other interested Departments. However, it is possible that some additions or alterations may be suggested before the final text is prepared for presentation to India.

5. Similar letters, together with a copy of the draft text of the agreement, have been sent to our High Commissioners in New Delhi and London.

A.E. RITCHIE
for Secretary of State
for External Affairs