CANBERRA (Reuters) ? Australian Prime Minister Julia Gillard is pushing to overturn a ban on sales of uranium to India, removing a diplomatic thorn between the two countries and potentially opening up new markets for Australian suppliers.
Australia has refused to sell nuclear material to India because it has not signed the Nuclear Non-Proliferation Treaty (NPT), but Gillard's ruling Labor party will debate lifting the ban at its conference next month.
"It is time for Labor to modernise our platform and enable us to strengthen our connection with dynamic, democratic India," Gillard said in a column in the Sydney Morning Herald newspaper.
The move is set to spark heated debate at the party's December conference, but should easily pass with support from Labor's dominant right faction. The policy does not need to go to parliament for approval but the conservative opposition also supports uranium sales to India.
Gillard's policy shift comes on the eve of U.S. President Barack Obama's visit to Australia and would bring Australia's uranium policy into line with the United States.
Washington in 2008 signed a civil nuclear agreement with India over the use of uranium for nuclear energy.
Critics accused the United States of undermining the global non-proliferation regime, but the deal was seen by President George W. Bush as the centrepiece of a new strategic relationship with India, viewed in Washington as an increasingly important economic and geopolitical counterweight to China.
Australia, one of the United States' closest allies in the region, supported the U.S-India nuclear agreement as a member of the 46-member Nuclear Supplier's Group, but had continued to refuse to sell uranium to India.
India has long complained about the ban as it seeks access to nuclear supplies for its power sector and growing economy.
Australia has almost 40 percent of the world's known uranium reserves, but supplies only 19 percent of the world market. It has no nuclear power stations.
The country now has four mines, BHP Billition's Olympic Dam, potentially the world's biggest; Energy Resources Australia's Ranger mine; the Beverly mine, owned by U.S. company General Atomics, and Honeymoon mines, owned by Uranium One and Mitsui & Co.
Shares in smaller uranium producers and explorers rose, with
Paladin Energy up 4.5 percent and Toro Energy up more than 10 percent.
GREENS OPPOSED
A decision to lift the ban would be welcomed by Australia's mining sector but is strongly opposed by Labor's political allies, the Greens.
Strict conditions are imposed on uranium exports to ensure it is used for power generation and not weapons. Nuclear-armed India has repeatedly clashed with neighbouring Pakistan, which also possess nuclear weapons.
India has refused to sign the nuclear NPT, arguing it is discriminatory and flawed in allowing only countries which had tested nuclear weapons before 1967 to legally possess them.
Pakistan, Israel and North Korea are the only other non-signatories to the treaty.
Resources Minister Martin Ferguson, who has just returned from India and who has championed uranium sales to the country, told Australian radio a change in policy would normalise Australia's bilateral relationship with India.
"It is about time we fronted up to the fact that India is a responsible nation. They have a desire to assist their community to get out of poverty, with 40 percent of the population having fewer than 12 hours of electricity per day," Ferguson said.
Greens leader Bob Brown condemned the proposal, and said selling uranium to India would encourage a nuclear arms race by countries in the region and make Australia less safe.
Two-way trade between India and Australia is currently worth about $20 billion a year, with the balance skewed in Australia's favour because of India's voracious appetite for resources.
Canberra has forecast uranium exports to rise from around 10,000 tonnes a year to 14,000 tonnes in 2014, worth around A$1.7 billion.
BHP Billiton, which is planning a major expansion of its Olympic Dam copper and uranium mine, said it would review its position on sales to India if the government changed its policy.
Rio Tinto had no immediate comment.
POWER PUSH
India's 19 nuclear plants produce only a small fraction of the country's electricity. That figure is projected to double over the next 25 years as new plants are built, requiring more overseas uranium purchases.
Uranium prices have fallen below $55 a pound since the March 11 tsunami that knocked out Japan's Fukushima nuclear plant. That compares with January's price of nearly $75, itself nearly half a high of $136 in 2007.
Australia has also been in discussions with the United Arab Emirates on agreements that could potentially open up a new market for Australian uranium.
For now, supplies of uranium to the world market continue to be supplemented with secondary sources of uranium -- stockpiled fuel and nuclear arms decommissioned since the end of the Cold War -- which are now in decline. That additional supply provided nearly half of demand in 1999 but by 2010 it had dropped to 30 percent, according to sector estimates.
The decline in secondary supply may accelerate once the "megatons for megawatts" programme that converts Russian nuclear warheads into reactor fuel expires in two years, taking secondary supply lines from Russian and U.S. uranium stocks to as low as 5 percent, from 40 percent now, analysts say.
BHP, Cameco, Rio Tinto and others are taking steps to dig new mines and expand old ones to take advantage of a forecast 20 percent leap in global uranium consumption by 2015.
In Australia, BHP also wants to mine 90,000 tonnes of uranium from its Yeelirrie deposit over 30 years but has yet to break any ground.
($1 = 0.980 Australian Dollars)
(Additional reporting by James Regan and Lincoln Feast in Sydney and Sonali Paul in Melbourne; Editing by Ed Davies)
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