New Delhi India's energy plans in Russia may suffer a setback with the country’s nuclear liability law coverage extending to the Kudankulam power plant set up with Moscow’s participation. Russia is already upset after its telecom major Sistema was asked to pay more as licence fee after the 2G spectrum scam. These two major irritants will be the key issues that President Putin would be discussing when he arrives here in October for a summit. According to experts, the Russians were under the impression that the nuclear liability law — which makes suppliers liable for compensation in case of accidents — won’t be applied to reactor number third and fourth since it is the extension of the same project and contract. Though India insists that the law is not applicable to the third and fourth reactors, it has also sought legal opinion on the issue, as it could complicate talks with France and US. “Russia has drawn attention to the protection of mutual agreement signed between the two countries and wants to take India to international arbitration court. Sistema is key to some of our proposed investment in Russian energy sector , that is likely to come under shadow," said Professor Arun Mohanty, director, Eurasian Foundation, Jawaharlal Nehru University. “Moreover, this would affect mutual investment, send wrong signals to foreign investors and potential Russian investors in particular. Also, under such circumstances, India may find it difficult to have a stronger footing in Russian energy sector that it has been seeking for meeting its energy needs." In fact, during Deputy Prime Minister Dmitry Rogozin’s visit to New Delhi in early July, the two issues were discussed and the Indian side was informed that the investments by Indians in that country too would get affected, revealed sources. If plants number three and four fall under the purview of the nuclear liability law, then Russia will not only increase the cost of the reactors, but also seek a change in the conditions for the credit line being provided by it to build them. Russian officials, sources said, have warned that any “negative influence” on the 1988 agreement for the first and second unit and the 2008 civil nuclear cooperation agreement could jeopardize collaboration for nuclear power plants between the two countries. Both Russia and India have inked a protocol for financing the third and fourth units under which Russia will offer an export credit line of close to $3.5 billion for the two pressurized water reactors. The amount is payable in 14 years, from the start of power generation at 4% interest per annum. “While Russia has been insisting all along that work on the number three and four units, too, be carried out under the 1988 agreement between the two nations, which has ensured immunity for Kudankulam one and two from the liability law, the government has been in a bind over how to move ahead on the "third-generation" nuclear plants being built by the Russian-owned AtomstroyExport." India’s nuclear liability legislation caps the operator's liability at R1,500 crore ($331 million) and gives the operator the right to seek damages from suppliers if there is an accident. The turbulence affecting Sistema was first felt in diplomatic ties in June when India expressed interest in bidding for a stake in Russia's Alrosa, the world's second-largest diamond producing company after DeBeers. Russia has told India that the Sistema issue will need to be resolved before other trade and investment issues could move on. While the Sistema chairman Yevtushenkov has also written to the PM, seeking his intervention in protecting the “legitimate interests” of his company, chances are they will go for international arbitration.