Averting the Stand-off
         Date: 09-Aug-2018
IAs Bharat and the US prepare for their first ‘2+2 dialogue’ on September 6 in New Delhi between the Foreign and Defence Ministers, the waiver move for the CAATSA, even if not entirely satisfactory, is a welcome development
 

From Left, Russian President Vladimir Putin, American President Donald Trump, and Indian Prime Minister Narendra Modi

 
Russophobia in America has reached such levels that countries like India have become vulnerable to severe collateral damage as a consequence. US-Russia relations have got caught in vicious domestic politics, which makes their sane handling by the American political class most difficult. President Trump favours better ties with Russia, but he is being obstructed in his attempt to do so by the Democratic party, some senior Republicans, the US Congress and the liberal media. Russia is being accused of having interfered in the Presidential elections through contacts with the Trump campaign team and hacking actions against the Democratic party to damage Hillary Clinton’s candidature. Trump has been obliged to impose punishing sanctions against Russia to deflect pressure on his troubled Presidency, the most serious from India’s point of view being the Countering America’s Adversaries Through Sanctions Act (CAATSA) that Trump was obliged to sign in August 2017 against his will. In April 2018, under Section 231 of the Act, Trump imposed wide-ranging sanctions on 39 entities or companies in Russia that provide defence equipment to India. These include Rosoboronexport through which all our defence procurement passes, Almaz-Antey (the supplier of the S-400 air defence system), Sukhoi Aviation, Russian Aircraft Corporation MiG, and United Shipbuilding Corporation. Under CAATSA dealings with them will make third parties liable to what are termed as “secondary sanctions”.
 
Under Section 231 of the Act the US President can impose sanctions listed in Section 235 of the Act on third parties engaged in a “significant transaction” with the Russian defence sector. The term “significant transaction” is not defined which gives considerable latitude in interpretation, though it would seem to exclude supply of spare parts and other forms of production support for already procured equipment. The CAATSA sanctions, inter alia, authorise the US President to suspend export licences related to munitions, dual-use and nuclear-related items and the ban American investment in equity/debt of the sanctioned person. If licences are suspended, American companies will be barred from participating in Indian defence contracts and will not be able to provide maintenance support for the defence equipment already acquired by India, affecting India’s defence preparedness. Failure to provide such support will violate the existing Force. Majeure clauses of our Defence Procurement Procedures will entail severe penalties. The ban on equity/debt investment will jeopardise the joint ventures that American defence companies have formed with Indian companies, besides barring them from creating such ventures in the future under MoD’s newly announced Strategic Partnership (SP) model as part of its Make in India policy.
The US Congress has agreed to grant the Trump Administration limited authority to waive sanctions on India, with Indonesia and Vietnam
India cannot take CAATSA lightly as it has the potential to interfere with our defence ties with Russia seriously and in the process impose unacceptable security costs on us. Not only about 65 per cent of our defence equipment is of Russian origin, but as part of the strengthening of our exclusive and privileged strategic partnership with Russia, our defence ties have to be continually nurtured so that this central pillar of our relationship is not weakened. We are in advanced negotiations for the purchase of the S-400 air defence system from Russia, and the expectation is that the contract will be concluded at the time of the annual India-Russia summit this year. This $5 billion-plus contract for five S-400 systems is by definition a “significant transaction” and would prima facie expose us to CAATSA sanctions, which if imposed would inflict severe damage on our relationship with the US.
 
Hence the efforts that have been afoot to find a way out of the situation at both the Indian and US ends is appreciating. India has lobbied for a waiver from the legislation for itself, for which it is on strong ground. There has been an unprecedented expansion of India-US defence ties, with India acquiring $ 15 billion of defence equipment from the US since 2008 that has included the C-17 Globemaster and C-130J transport planes, P-8 (I) maritime reconnaissance aircraft, M777 light-weight howitzer, Harpoon missiles, and Apache and Chinook helicopters. More contracts such as for the Sea Guardian drones are maturing. Besides this, US companies like Lockheed Martin and Boeing are working hard to win the tenders for combat aircraft and helicopters. Accounting for about 15 per cent of our total procurement, the US was the second biggest supplier of arms to India in the five years ending 2017. Our Parliament’s Standing Committee on Defence has reported that US firms concluded 13 contracts with India worth roughly $4.3 billion over the last three years while Russia secured 12 contracts for only $1.2 billion.
 
 
 Bharat is planning to buy S-400 air defence system from Russia
 
India has no doubt alerted decision makers in the US that CAATSA would hit at the growing India-US defence ties and revive doubts in India about the reliability of the US as a partner. India has begun to buy US arms on the assumption that our experience of being subject to US sanctions is no longer relevant because ties have now reached a significant level of trust and maturity. If once again the spectre of sanctions raises itself, the upward trajectory of our defence ties will be stalled. India would come under extreme political pressure domestically to avoid any significant deal with US defence companies if sanctions over S-400 were to be imposed. Moreover, sanctions will be contrary to India’s status as a Major Defence Partner, the strategic understandings built within the Indo-Pacific construct and so on. Weakening India’s defence posture through sanctions would only benefit China which is now being recognised by the US as a strategic competitor. Moreover, Russian weapons in Indian hands do not pose any direct threat to America’s national security interests.
 
At the US end, the signals received have been mixed. On the one hand, US Defence Secretary Mattis has been active in seeking exemption from CAATSA for India from the US Congress by empowering the US Secretary of State to decide on a waiver for countries like India for national security reasons. For him keeping India close to the US is more important than punishing it for continuing to buy arms from Russia. According to him, providing such a CAATSA waiver authority will allow nations to build a closer security relationship with the US as they continue to move away from their reliance on Russian military equipment. The US has to answer the question whether it wishes to strengthen its partners in key regions or leave them with no other option than to turn to Russia, thereby undermining a once in a generation opportunity to more closely align nations with the US vision for global security and stability. In his view, Congress should see India as a check against China, which the US Administration sees as the most significant national security threat to the US.
 
State Department functionaries, on the other hand, have said that the Administration is fully committed to CAATSA and that it is working with partner countries, including India, to help them identify and avoid engaging in potentially sanctionable activity under CAATSA. Contradicting Mattis, they have asserted that the State Department is fully committed to implementing CAATSA, that the legislation has been discussed with the Indian Government, and that the US is working with our partners including India to help them identify and avoid engaging in the potentially sanctionable activity. We have, at various levels, communicated to the US that our relationship with Russia is time-tested and that India will not back out of the S-400 deal.
 
Some progress seems to have been made at the US end to avoid the inevitability of imposition of CAATSA sanctions against India. The US Congress has agreed to grant the Trump Administration limited authority to waive sanctions on India, with Indonesia and Vietnam the two other countries covered by the waiver. A conference committee of the House and Senate while reconciling the two versions of the 2019 National Defence Authorisation Act (NDAA) has decided to provide “flexibility for strategic partners and allies to move away from the use of Russian military equipment to American equipment, while ensuring that US defence and security interests remain protected, through a modified waiver” under CAATSA. The new language in NDAA 2019 amends Section 231 of CAATSA. It says that the US President may use the authority to waive sanctions if he certifies in writing to the US Congress that the waiver is in the national security interest, that it is not a significant transaction with any one of seven Russian defence or intelligence agencies listed in the amendment and that the transaction doesn’t affect specific US interests. In addition, the President must also certify that the foreign government in question meets one of two conditions: that it is “is taking or will take steps to reduce its inventory of major defence equipment and advanced conventional weapons” made by Russia, or it is “cooperating” with the US government on security matters critical to US strategic interests.
 
The wording of the new authority could allow the administration to waive sanctions if India were to proceed with the purchase of the S-400 system, but is conditional on India reducing its purchases from Russia and buying more US equipment, which means that future waivers, beyond six months at a time, will be used as levers to press India to acquire US arms in preference to Russian weaponry. This does not amount to an explicit, permanent waiver, which is problematic. The exemptions are contingent on the president ’s certification, but given Trump’s unpredictability, the issue will continue to burdened with uncertainty.
 
Given this “modified” waiver weighed down by several conditions, Mattis has written to the House Armed Services Committee chairman, calling the conditions
 
“stringent” and renewing his request for a cleaner national security
 
waiver. The final version of the NDAA will be voted on by both chambers in the coming weeks before being signed into law by Trump. As India and the US prepare for their first ‘2+2 dialogue’ on September 6 in New Delhi between the Foreign and Defence Ministers, the waiver move, even if not entirely satisfactory, is a welcome development and the credit should go to the Modi Government for working effectively to achieve this success.
 
(The writer is a former Foreign Secretary)