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The India-US relations is certainly experiencing some turbulence but it is nowhere near a crash-landing. Illustration: Jayachandran/Mint
The India-US relations is certainly experiencing some turbulence but it is nowhere near a crash-landing. Illustration: Jayachandran/Mint

Managing the turbulence in India-US relations

India should stay firm on the S400 deal with Russiabut it may not be left with too many options on Iran

This is a tricky time for the India-US strategic partnership. On Tuesday, a senior state department official in the US asked all countries, including India, to reduce oil imports from Iran to zero by 4 November. If India fails to do this, its companies will face the same sanctions as any other violator of this American diktat. On Wednesday, the US ambassador to the UN, Nikki Haley, conveyed essentially the same message to Indian officials in New Delhi. This comes against the backdrop of more potential friction building up between the two countries. India is in the process of purchasing S400 surface-to-air missile systems from Russia—a decision that could mean more sanctions for New Delhi, thanks to a US law called “Countering America’s Adversaries Through Sanctions Act" (CAATSA).

In addition to these issues, US President Donald Trump has been quite vocal about the tariffs imposed by India on American goods. A number of such issues were supposed to be resolved during the inaugural 2+2 dialogue between the external affairs and defence ministers of both countries on 6 July. However, the US has decided to postpone this meeting. In fact, the scheduling of this dialogue has long been a problem.

The bilateral relationship is certainly experiencing some turbulence but it is nowhere near a crash-landing. There are good structural factors that will ensure that the India-US relationship remains in a healthy state. Still, India needs to get a quick grip on the situation and formulate careful steps to tide over this phase.

To start with, India needs to make a clear distinction between the sanctions that it will face on account of importing oil from Iran and those that will result from India’s defence partnership with Russia. India has a weaker hand on Iran than on Russia. One, there are many private companies involved in the process of importing oil from Iran, primarily in the shipping, insurance and refinery sectors. Worried about being cut off from the US, these companies will most likely pull out of Iran. On the other hand, India’s acquisition of Russian-made S400 missile systems can be managed at the level of the government and public sector, with little role for private companies.

Two, by hurting India’s defence acquisitions from Russia, the US is putting itself in the line of fire. India is the world’s largest arms importer and the US has made rapid strides in this market in the past decade. Washington should be seriously worried about jeorpardizing future defence deals in India if CAATSA begins to bleed New Delhi. This is the reason why the Trump administration is more flexible on CAATSA, but its hands are tied by the US Congress. On Iran, it is the White House that has taken the truculent position.

Three, American objectives are far clearer in the case of Iran. Trump wants to significantly degrade Iranian capabilities to acquire nuclear weapons and to interfere in other countries in the region. CAATSA, on the other hand, was triggered by allegations of Russian interference in the US presidential election. It is not clear how exactly CAATSA will deter low-cost operations like email hacking or the spread of propaganda on Facebook—charges Moscow has been accused of.

All this suggests that India should stay firm on the S400 deal. On Iran, New Delhi may not be left with many options if private companies decide to throw in the towel. European nations are facing the same problem. They want to stand by Iran but private companies are pulling out of the country one after the other. Many big names like Boeing Co., General Electric Co., Total SA and Reliance Industries Ltd have already announced their exit plans from Iran.

There is a point to be made about US sanctions here. As Nicholas L. Miller points out in his book Stopping The Bomb: The Sources And Effectiveness Of US Nonproliferation Policy, American sanctions are always more effective on countries which are economically integrated with America than those which are not. The US uses its economic and military links as leverage in its non-proliferation goals. It is no surprise that the most recent proliferators are North Korea and Iran—both not much dependent on the US. Unilateral US sanctions can achieve little against such countries. Therefore, the US seeks the support of other countries to build a tighter multilateral sanctions regime.

When this support doesn’t come voluntarily, the US uses secondary sanctions to extract coerced support from other countries. Being cut off from the American market and financial system is too high a cost to pay for defending a country like Iran. In other words, the US is increasingly willing to hurt its allies and partners in order to change the behaviour of its enemies. It is unlikely that India will be able to secure some special waiver, like it did with the Barack Obama administration. To be sure, Haley has reportedly conceded that India will be granted some waiver for the development of Chabahar port—India’s link to Afghanistan and Central Asia—but that may not extend to crude imports.

The Indian response to the American threat of secondary sanctions for importing Iranian oil should be seen in this larger context. There is no reason, however, to give in on the S400 missile systems.

How should India react to the threat of American sanctions? Tell us at views@livemint.com

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