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A CAAT and Mouse Game

Ever thought about how the United States is able to impose or threatens to impose so many sanctions on countries all around the globe? Well, the reason might be due to the predominant position of the US Dollar as the main foreign reserve currency in the world. It is also used as a major international trade currency (especially for oil) which gives the US exorbitant privileges, power and leverage to apply sanctions. This is backed by the US having one of the most powerful armies in the world and having close allies. In other words, the US can exploit its dominant position to impose certain policy decisions on other countries. One such imposition which has been in news for quite some time now is the implementation of CAATSA by the United States government.

Countering America’s Adversaries Through Sanctions Act (CAATSA) was signed into law by Donald Trump on 2nd August 2017. It aims to counter the aggression by Iran, Russia and North Korea, the new ‘Axis of Evil’, through punitive measures. Moreover, any third-country, firm or individual that engages in a significant transaction with these countries will face a penalty. It is to be noted, however, that the dealings by any country with these entities does not automatically lead to the imposition of sanctions under the CAATSA provisions. The key determinant for imposing sanctions is ‘significant transaction’, which is not based purely on monetary value. The factors considered in the determination may include the significance of the transaction to US national security and foreign policy interests, in particular, whether it has a significant adverse impact on such interests and the nature & magnitude of the transaction. Why are Russia, Iran, and North Korea being explicitly targeted?

CAATSA aims to punish Moscow for its alleged meddling in the 2016 US presidential elections and its military interventions in Syria. Sanctions were imposed on Iran after America withdrew from Joint Comprehensive Plan of Action, known commonly as the Iran nuclear deal or Iran deal, claiming that it had “disastrous flaws”. The destabilizing measures of Iran in the Middle-East and the attacks by Iran-supported ‘Houthi’ rebels on US ships in the Red Sea have further added fuel to the fire. As to the case with North Korea, Kim’s ‘over-boastful’ attitude threatening to destroy the US with nuclear attacks and the country’s alleged involvement in Human Rights violation merited their inclusion in the list. Effect on India CAATSA lists several sectors of Russian industry that could suffer sanctions and authorizes the punishment of US allies who buy Russian military equipment, thus the Indian interests take a hit.

India has been continuously involved in trade related to military-equipment with Russia. Let’s ‘assume’ that India abruptly stops any further defense purchases from Russia under this political pressure. But that wouldn’t make sense as the Russian equipment currently accounts for nearly 70% of India’s military inventory. This also implies that we require continuous maintenance and spare parts for day to day replacement of this inventory. Added to this are the numerous joint ventures between the two countries for transport infrastructure, new technology, pharmaceuticals, aircraft and automobile manufacturing, the diamond industry, and agriculture. India cannot afford to burn its bridges with its old ally even under the threat of being put under the sanctions list. Moreover, these sanctions are meant to counter Russia and not India. In any case, it would be unreasonable to think on the part of the US that India can stop dealing with Russia which has been a long-time friend and supplier of technology to India.

Importance of the S-400 deal with Russia
India is placed in a very turbulent and nuclear-powered region. Its security landscape is challenged continuously by the unresolved border disputes. It’s ‘fair-weather friend’, China’s increasing military activism under its ‘lifetime’ president and its recent military assertion in Doklam poses a grave challenge to India in the foreseeable future. Needless to mention, we have been continuously receiving threats about nuclear attacks from Pakistan since the last decade. Both of these countries have upgraded military equipment capable of inflicting heavy damage through aerial attacks. China had already entered into an agreement for the purchase of S 400 and Moscow has already started delivering S 400 systems to Beijing. In order to meet the myriad security challenges, it has been a constant endeavor of India to strengthen its defense preparedness, by equipping its armed forces with state-of-the-art arms. Besides, the last major deal with Russia was in the 1990s relating to the purchase of 50 ‘Sukhoi Jet Aircrafts’. The conclusion of the S400 deal is a big thing on the strategic front. S-400, simply put, makes India a more secure country from missile attacks.

Considering the above-mentioned facts, India made it clear that it would go ahead with the deal, denying any pressure put forth by the United States, mentioning that the deal is in the greater interests of the country and it would not consider any sanctions put forward by individual countries.

What about Tehran?
In the Iranian case, the purpose is to prevent Tehran from obtaining external cooperation, material or financial, for its nuclear program. However, India has not stopped importing oil from Iran. India imports oil from majorly 3 countries- Iraq, Saudi Arabia, and Iran. It would be unreasonable on the part of US to think that India would abruptly stop importing any crude oil from Iran! Considering these facts the US has broadly agreed to grant India a waiver from Iran sanctions. This would allow Indian oil companies to continue to import about 1.25 million tonnes of oil a month for the next six months. This is about one-third of what India previously imported, emphasizing that it has made significant cuts to maintain Indo-US ties. Why is the US going easy on India?

India is presently the largest importer of arms in the world. It topped the list of biggest importer of weapons between 2013 and 2017 and the arms imports have increased by roughly 25% in the last 10 years. A lot of this comes from the US itself. With a shrinking defense market, it is in the US interests not to let anything affect its growing trade with India. Putting India under sanctions could actually be counterproductive for the US as India has many other sellers like Israel and indeed Russia itself. In simple terms, India has deep pockets and the US wants to keep its factories running. Our defense relationship is still suffering from sanctions that the United States imposed on India for conducting nuclear tests in 1998. Let’s not set back the clock another 20 years. It is in this context that the US Defense has considered an off-ramp for India with the current United States Secretary of Defense ‘James Mattis’ releasing a statement saying it would be in America’s interests to consider a waiver for India.

Added to these is the fact that the United States and India have entered into the Communications Compatibility and Security Agreement (COMCASA). COMCASA is a US platform for more secured communication by the army of the country during the times of war. Through this India can have access to United States’ sophisticated defense equipment which is superior to most other technologies. The threat of sanctions on India could also become a hindrance for this. And there is no denying the fact that a major chunk of American companies like Google, Walmart, Twitter, Facebook etc. do not have any major earnings from China, one of the most developed economies in Asia but have a huge share in India. All of this shows that pissing off India is not good politics!

The waiver on Iran sanctions has resolved at least one aspect on a temporary basis. With respect to Russia, India is making a case that the S-400 deal was entered way before CAATSA. However, any exemption granted by the US will only be known when the Defence Ministry makes its initial payment of the missile system. New Delhi has to be aware that the waivers are contingent upon Mr. Trump’s continued support to Indian defense requirements. Given the capricious and unpredictable policy swings Mr. Trump has shown, it will be prudent for New Delhi not to presume that the problems over CAATSA have fully blown over. It is, indeed, like any other ‘CAAT’ and mouse game.
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