Asia Times: US sanctions waiver leaves India cool


	September 25, 2001	atimes.com

India/Pakistan

US sanctions waiver leaves India cool
By Sultan Shahin

NEW DELHI - The advantage goes to Pakistan in the case of the United States waiving sanctions against both Delhi and Islamabad simultaneously. The sanctions were imposed after the nuclear tests conducted by India in May, 1998 at Pokhran in the state of Rajasthan, 24 years after the original tests conducted at the same place in 1974, and followed swiftly by Pakistan in retaliation at Chagai Hills in Baluchistan.

India has described the Bush administration's decision to lift the sanctions as "an expected step". Foreign Affairs Minister Jaswant Singh said it was "welcome news but expected" and that New Delhi was awaiting the formal announcement.

Though the move is widely seen as a reward for Pakistan for supporting the US's expected military campaign against the Taliban for harboring Osama bin Laden, India has been included to avoid resentment and accusations of US bias. But Washington's sanctions linked to the October 1999 bloodless coup in Islamabad that brought President General Pervez Musharraf to power are expected to remain. Even before Chagai Hills, Pakistan had been under sanctions under the Pressler Amendment. In 1990, Republican Senator Larry Pressler campaigned successfully to activate restrictions on military and humanitarian aid to Pakistan on the grounds that proof of the country's nuclear program had become available.

Though political parties have welcomed the US's move to lift sanctions on India, they say that the development will not be of much help to the country. Rather, it was Pakistan that stood to gain from the removal of economic and military sanctions, they said. The chief opposition party, Congress, welcomed the lifting, but said that it agreed with Finance Minister Yashwant Sinha that it would not make a difference to India's economy. Former diplomat and deputy foreign minister, now Congress official Natwar Singh, said that the sanctions imposed after the Pokhran blast had become counter-productive and should have been lifted long back. But it was better late than never, he said.

The Bhartiya Janata Party (BJP) that heads the ruling coalition expressed happiness at the development, but was nevertheless guarded in its response. Convener of its economic cell, Jagdish Shettigar, said that the real fallout of the decision would be known only after a year or two. Shettigar said that it was still not clear whether the lifting of sanctions also meant that the transfer of technology in nuclear-related and defense fields would be allowed to India. But, he said, the US move would give "some psychological comfort" to India.

An important member of the ruling coalition, the Samata Party, said that it was Pakistan which would be the main beneficiary and that it would not make much of a difference for India. Samata leader and the coalition's convener and former defense minister, George Fernandes, said lifting of sanctions will not benefit India unless restrictions imposed on the transfer of high technology are also withdrawn. He told newsmen that the US had not done India any great favor "if it has only lifted the post-Pokhran sanctions. "If restrictions on the transfer of technology, exchange of scientific know-how and items of dual use have not been removed, lifting of sanctions does not mean much for us," he said.

Indian industry, however, was more positive. In its assessment, it would help technology and product exports from the US, besides giving a psychological boost to increasing bilateral trade and investment. While the sanctions did not materially impact India, the industry felt that its shadow had affected Indo-US relations, as well as sentiment about bilateral trade and investment between the two countries.

"Lifting of sanctions will actually help US companies in their business with India because as long as the sanctions were in place, US companies were inhibited in their investments in India and transfer of technology to Indian companies," said the Confederation of Indian Industry (CII) president Sanjiv Goenka. He said that initially, the US Exim Bank and the Overseas Private Investment Corporation (OPIC) were not permitted to finance and underwrite US companies doing business with India.

This had impacted on their exports to India as well as investments and technology transfers. Even after the Exim and OPIC were allowed by the Clinton administration to deal with India, exports to India remained flat. India, meanwhile, had located alternate sources of products and technology. The removal of sanctions would free the trade environment, which could now catch up with the excellent political relationship, Goenka said. He added that the CII would now take new initiatives in spite of the global slowdown to increase trade and investments with the US. The Indo-US business partnership had been transformed in the past few years, Goenka said. IT, pharmaceuticals, insurance, banking and portfolio investments by Indian corporates in the US were now the new backbone of the links. All these would be reinforced by the lifting of sanctions and traditional trade would gather a new momentum.

The Assocham president, Raghu Mody, while welcoming the move, felt that it would lead to greater cooperation and collaboration, particularly in the fields of space, high technology and research laboratories. "It will also give a tremendous boost to the Indian companies that had not been able to export due to their investments in the defense sector so far," he said. The FICCI secretary general, Amit Mitra, said "the move will be a big psychological boost and encourage India to do more business with the US. However, the biggest beneficiaries will be the 39 large cutting edge technology companies and research laboratories, including BHEL, Godrej and Boyce, Kirloskar Brothers and ECIL, who will now be free to import any technology from their partners in the US," he added.

Thus, while most sections in India welcome the move, the main reason behind their lukewarm response is the perception that, in the words of the BJP spokesman Vijay Kumar Malhotra, "Pakistan will be the real beneficiary". Ruling party politicians, however, generally have to be guarded in their response. No such diplomatic qualms afflict strategic analyst Brahma Chellaney, who describes it as a "symmetric action that will have an asymmetrical impact".

Writing in north India's largest circulated newspaper, the Hindustan Times, (Sep 24), he says, "With Pakistan set as a launch pad for America's second Afghan war, Indian foreign policy is entering one of its most challenging phases. Once again, Washington is rewarding a military regime in Islamabad for allowing itself to be used - this time against the Taliban created by Pakistan's state-run terrorist complex."

The new rewards approach was underscored, in his view, by the rapidity with which George W Bush lifted the remaining 1998 sanctions against Pakistan and India. "For almost eight months, the Bush team had been dangling the carrots of a sanctions waiver and strategic partnership to make Indian foreign policy amenable to its vision. But even after India reversed its policy of isolating the Musharraf regime (at the behest of the US?) and held the disastrous Agra summit, the sanctions were not waived because the carrots had become a source of valuable leverage. Now, within days of Musharraf being forced to seemingly sell out the Taliban, Bush has lifted sanctions, more to come to the immediate aid of Pakistan's battered economy than to befriend India as part of a strategic plan. Bush's action was designed to be symmetrical in appearance. But not only is its timing self-explanatory, its impact will be asymmetrical."

The benefits of the action will largely go to Pakistan, whose economy had been smothered by the sanctions but now gets much-needed fresh air to recuperate, explains Chellaney. The effect on India will be marginal and largely symbolic. This is because Bush has withdrawn only the 1998 sanctions, whose effect was minimal on India but severe on Pakistan. The US hasn't withdrawn the real sanctions that hurt India - the technology controls that began after New Delhi stayed out of the Non Proliferation Treaty and expanded when it conducted its first nuclear test in 1974. In any case, most of the 1998 sanctions against India were waived by late 1999 and those still in place (such as on World Bank lending) had been gradually relaxed. With their formal withdrawal, there will be a smoother flow of World Bank loans to India and greater room for military-to-military ties, Chellaney writes

Despite his pro-US inclinations, Chellaney doesn't seem too happy with the turn of events for India. For Pakistan, he continues, the Bush action means much-needed relief. "In recent days, Washington had already persuaded its close allies like Japan and Australia to resume aid to Islamabad. This relief, however, will not significantly alter Pakistan's grim economic situation, with the impending war likely to drive away even risk-taking investors. America's second Afghan war is a consequence of the forces it created in the first war as well as its withdrawal from the scene without installing its own regime in Kabul. This time it is possible it may stay strategically engaged in Afghanistan and Pakistan for a long time to come.

"Bush thus is in no hurry to encash the blank cheque India handed him when it readily offered to open its military bases to the US war machine. Bush's counter-terrorist partnership with Pakistan, a nation that employs terrorism as a state instrument, raises difficult challenges for India, including how to ensure India has a role to play in shaping developments and does not reap only the consequences of US-triggered events in its neighborhood. More than ever, India needs to assert its interests," concludes Chellaney.

While most observers, politicians, journalists, former bureaucrats and even the common people who appear on television shows as part of the audience, appear to look at the fall-out of terrorist attacks against the US in terms of traditional India-Pakistan rivalry, and despite fervent denials Indian foreign policy continues to be a hostage to its Pakistan-centric prism, a few observers are beginning to come out of the straitjacket.

Ajai Shukla of New Delhi Television appears to be one such defense analyst. Writing in the Indian Express (Sep 24) in an article entitled "Time for maturity", he advises India to "strike now ... for lasting peace with Pakistan". India must use this opportunity, he says, to solve the Kashmir problem, rather than to win points against Pakistan. Militancy and terrorism are under pressure and Musharraf has been noticeably silent on the Kashmiri 'freedom fighters' since the terrorist strike in New York.

Bush has already labeled this an opportunity to resolve the Kashmir issue. While US mediation runs contrary to Indian foreign policy, US pressure on Pakistan should be used to arrive at a settlement based on the status quo. India, Shukla says, should certainly not join a US coalition that is unlikely to achieve anything but more discord and animosity. The US will soon be gone; but India and Pakistan will always live together as neighbors. The present fire must not be used to set the area ablaze, but to forge the tools to create a lasting peace in the region.

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