U.S. injects new irritant in ties with India

Brahma Chellaney

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U.S. President Donald Trump’s first round of Iran-related sanctions has come into force this week, with no waiver for India in sight as yet. The U.S. Congress has passed legislation granting India a waiver from its new Russia-centred sanctions, but the waiver is conditional and contingent upon a periodic, six-monthly presidential certification. The Indian media highlighted the passing of the waiver legislation but not the conditions it incorporated. 

India, as a longstanding significant buyer of Russian weapons and the second-largest importer of Iranian oil after China, is a major victim of the new U.S. sanctions. By implicitly mounting two-pronged pressure on New Delhi on energy and defence fronts, Washington has injected a major new irritant in the bilateral relationship, as if to underscore the risks for India of pursuing a foreign policy too closely aligned with America.

By slapping a nation with punitive sanctions, the U.S. seeks to block trade and financial activities with that country even by other states. Such extraterritorial sanctions — which it euphemistically labels “secondary” sanctions — run counter to international law. Yet the U.S. uses its unmatched power to turn national actions into global measures.

As the world’s reserve currency that greases the wheels of the global financial system, the U.S. dollar arms America with tremendous leverage, making U.S. sanctions the most powerful in the world. Most international transactions, from banking to oil, are conducted in U.S. dollars.

Today, however, the U.S. faces a major test to effectively enforce its new extraterritorial sanctions relating to Iran, a Trump obsession, and Russia, which still evokes bipartisan hostility in Washington although Russia’s economy has shrunk to one-tenth the size of China’s and its military spending to one-fifth of China’s.

Trump’s sanctions aimed at throttling the Iranian economy after his unilateral withdrawal from the multilateral Iran nuclear deal have prompted calls for defiance even in Europe. The new Russia sanctions, however, were initiated by Congress, which passed a law to compel the Trump administration to act against Moscow. Known as Countering America’s Adversaries Through Sanctions Act, or CAATSA, the law uses the sanctions threat to wean countries off their craving for Russian weapons so as to boost America’s own arms sales.

The U.S. is already the world’s leading exporter of weapons by far. Another paradox is that the U.S. has overtaken Russia as the top arms seller to India. But while Russia has transferred to India offensive weapons, including a nuclear-powered submarine (INS Chakra) and an aircraft carrier (INS Vikramaditya), the U.S. has been selling defensive military systems to India, such as the P-8I maritime surveillance aircraft and the C-17 Globemaster III and C-130J Super Hercules military transport planes. India cannot snap its defence ties with Moscow for another reason: It relies on Russian spare parts for maintenance of its Russian-made hardware, some of Soviet origin.

While the CAATSA waiver will allow India to go ahead with the pending purchase from Russia of the interceptor-based S-400 Triumf air and anti-missile defence system, future Indian imports from Russia are likely to face U.S. scrutiny. In fact, the waiver legislation mandates that India, Vietnam and Indonesia — the three countries granted waivers from the CAATSA sanctions — demonstrate that each is significantly reducing dependence on Russian arms or significantly increasing cooperation with the U.S.

The congressional intent was clearly to leverage the waiver. For example, a presidential certification must specify the active steps each nation is taking or planning to cut its inventory of Russian hardware. Such a reporting requirement, by shining a spotlight on India’s arms inventory, promises to act as an irritant in the bilateral relationship. Washington is also stepping up pressure on India to sign the Communications Compatibility and Security Agreement (COMCASA), which the Indian military fears could compromise its network.

The reason why only India, Indonesia and Vietnam were granted waivers is that the U.S. is trying to sway these three into its orbit. In the case of Turkey, a NATO member that, like India, is buying the S-400, Congress is threatening reprisals against Ankara. U.S. pressure on India, Indonesia and Vietnam, however, is unlikely to fully dissipate because no blanket waivers have been granted.

Meanwhile, through its Iran-related sanctions, the U.S. is likely to influence the energy-import policy of India, which currently imports more than three-fourth of its crude oil requirements. According to the International Energy Agency, India is set to emerge as the fastest-growing crude consumer in the world by 2040. Washington is seeking to sell more oil and gas to India and also encouraging it to switch imports from Iran to Saudi Arabia and other U.S. allies.

Next-door Iran, however, has long been a major oil supplier to India. It will remain important for India’s energy-import diversification strategy. U.S. sanctions, however, threaten to affect even New Delhi’s political cooperation with Tehran, including impeding India’s Pakistan-bypassing transportation corridor to Afghanistan via Iran. India has invested in modernizing the Chabahar Port. As the top U.S. general in Afghanistan acknowledged last year, “Iranian-Indian-Afghan cooperation over the Chabahar Port presents great economic potential” for landlocked Afghanistan, which has had to depend on a hostile Pakistan for access to a port.

By making India a key target of the extraterritorial effects of its sanctions on Iran and Russia, and then dangling concessions as favours, the U.S. is doing a disservice to its goal of making the Indo-U.S. strategic partnership a linchpin of its larger strategy to build a free, open and democratic-led Indo-Pacific region. Its actions compound India’s foreign-policy challenges, including how to balance the relationships with various key players.

Brahma Chellaney is a geostrategist and the author.