Punitive action

The Clinton administration had no choice but to invoke sanctions.

IT is going to be a while before relations between the United States and India get back on track. And it will never be the same again. The Bharatiya Janata Party _ and its supporters in India _ may rejoice over the fact that it has finally "delivered" what it has been hoping for in the last four decades in the name of national pride; and some within the BJP and the government ministries may even be gloating over the fact that the nuclear tests caught the Clinton administration unawares.

However, there is the need to look beyond the chauvinistic chest-beating that is going on in the aftermath of the tests. The self-congratulatory mood of India on having become a "major power" (few in the comity of nations have come forward to offer any warm handshakes) should be viewed in the context of what the Government's decision has brought about. The argument that India can withstand the economic pressures only serves domestic political purposes.

India may justify the tests as a strategic necessity and dismiss the sanctions as of no consequence. But it is widely perceived in the U.S. that the nuclear tests had very little to do with concerns over national security and the regional security environment; they are seen more as the BJP's message to its coalition partners and an effort to use the national hysteria to position itself better politically.

The Clinton administration had no choice but to invoke sanctions as demanded by the U.S. law against countries testing nuclear devices. The 1994 Glenn Amendment or the Nuclear Proliferation Prevention Act is in fact untested. The Act calls for sanctions against any state detonating a nuclear device. The U.S. has already announced that it will cut off direct foreign aid except humanitarian aid, withdraw Government help for trade deals, work to stop loans to India from the international financial institutions such as the World Bank and the International Monetary Fund (IMF), ban military sales to India and the export to India of certain types of technology that could have military uses, prohibit U.S. banks from lending to India, and stop loans and loan guarantees from federal agencies such as the Export-Import Bank.

New Delhi need not worry about the IMF, but some $3 billion from the World Bank is in deep trouble. And the U.S. banks cannot be involved in any projects in India that has a government connection. And politically it is now clear that the Clinton administration will be cool to the idea of a permanent membership to India in the United Nations Security Council or to matters such as India's entry into the Asia-Pacific Economic Cooperation Forum.

India, however, feels that the U.S. also stands to lose. It is argued that U.S. businesses that are eager to get into India will oppose the sanctions. The sanctions would initially hurt a swathe of U.S. companies as they would not get Export-Import Bank cover for their exports. The biggest fallout of the sanctions could be the postponement or even the cancellation of some big contracts, such as those for the sale of jets by Boeing or the construction of power plants and telecommunications systems.

Boeing has been given an order for ten 737s by Jet Airways Ltd, India's largest private airline, which, it is learnt, depends on financing from the Export-Import Bank that could now be cut off. Boeing has far more at stake in a potential sale of about 18 planes to Air-India, which could be worth around $2 billion. It is possible that the sanctions could tip the order in favour of Boeing's rival Airbus of France. Some people in India will also assert that it is simple to switch from Boeing to Airbus, if the BJP really wanted to play its cards and tell the U.S. where to get off.

What complicates the case for India is that it is not in the same league as China and hence cannot stretch the Airbus card too far. Irrespective of what may be dished out by policymakers and senior bureaucrats, the fact is that U.S. businesses have been marking time for the last 18 months and perhaps have not even now decided on the depth of their commitment in the emerging Indian market. Of course officialdom would want to go by the commitment as opposed to what has been actually realised.

To say that the nuclear tests have "hardly" strained India's ties with the U.S. will be inaccurate. In the coming weeks, it will be seen in what manner the administration and Congress are going to respond.In the long term, the real damage to Indo-U.S. relations will stem from the scrapping of the legislation concerning Pakistan. Moves are afoot to do away with the Pressler Amendment of 1985, one of the key pieces of legislation that have prevented the sale of F-16s to Pakistan. Pakistan is already looking "good" and it is suspected that some bizarre efforts are under way to reward or outrightly bribe Islamabad for showing "restraint".

Under the garb of getting Islamabad to act in a responsible manner, administration officials and members of Congress seem to be tripping over one another to see who does a "better job" of appeasing Pakistan. However, there are still those in the administration and Congress who have not forgotten Islamabad's dubiousness of the 1980s and to caution that Pakistan, putting on a show of "restraint", will get the F-16s or the money back, get rid of the Pressler Amendment and still go ahead and test a nuclear device in the near future.