Piecemeal waivers

The U.S. has lifted some insignificant sanctions in the limited areas of clean energy and environment, while the substantive ones - the loans from the IFIs and export controls on dual-use technologies - remain.

R. RAMACHANDRAN

AS expected, President Bill Clinton's visit to India brought with it some sops on the sanctions front, but nothing of significance. These fresh carrots are mainly in the nature of non-humanitarian development assistance - in the limited areas of clean en ergy and environment - through programmes funded by the United States Agency for International Development (USAID). U.S. Commerce Secretary William Daley, who was part of Clinton's visiting team, indicated in no uncertain terms after his meeting with Fin ance Minister Yashwant Sinha that sanctions are linked to India signing the Comprehensive Test Ban Treaty (CTBT), which the U.S. itself has failed to ratify.

The nuclear sanctions imposed on India (and Pakistan) following the Pokhran-II (and Chagai) nuclear tests of May 1998 are pursuant to Article 102(b) of the U.S. Arms Export Control Act (AECA), known as the Glenn Amendment sanctions, and are not directly linked to the CTBT. They flow from the simple fact that India (and Pakistan) exploded nuclear devices. The lifting of these sanctions, or their being eased in limited ways, rests with the permanent waiver authority given to the U.S. President in October 1999 by Congress under the provisions of the Defence Appropriations Act, 2000. It was pursuant to this that Clinton lifted the sanctions partially in October 1999.

The Glenn Amendment sanctions, which were imposed on June 18, 1998, included the following: (a) termination of assistance under the U.S. Foreign Assistance Act of 1961, which includes U.S. developmental assistance including USAID and International Milita ry Education and Training (IMET) programme funding, except for humanitarian assistance and food or agricultural commodities; (b) termination of the sale of defence articles or defence services and termination of licences for export of items under the U.S . Munitions List; (c) termination of all foreign military financing; (d) denial of any credit, credit guarantees or other financial assistance by any department or agency of the U.S. Government - such as the Department of Agriculture (USDA), Exim Bank, t he Overseas Private Investment Corporation (OPIC) and the Trade Development Agency (TDA); (e) opposition to any loan for financial or technical assistance by any international financial institution (IFI) - such as the Asian Development Bank (ADB), the Wo rld Bank and the International Monetary Fund (IMF) - except for humanitarian purposes; (f) prohibition on U.S. banks from providing any loans or credits to the Indian or Pakistani government, except for the purpose of purchasing food or other agricultura l commodities; and (g) prohibition of export of dual-use goods and technologies controlled by the U.S. Export Administration Regulations (EAR).

The waiver authority given to Clinton in October 1999 was identical in its limited scope to the one given through the Brownback Amendment in October 1998 except for the fact that the earlier authority was only for one year. However, a significant differe nce is that the 1999 waiver authority provides for a presidential exception by which all sanctions can be waived if the President determines, and so certifies to Congress, that the application of the imposition of sanctions would not be in the national s ecurity interests of the U.S. Daley's remark, therefore, carries the implication of a decision by the U.S. executive to waive the sanctions in their entirety if India signs the CTBT, and India signing the CTBT is in the U.S. national security interests.

Clinton, as a result of the authority vested with him, could waive only sanctions (a), (d), (e) and (f), and not (b), (c) and (g). But, even within the limited scope of the waiver, he exercised the authority only partially (both in October 1998 and Octob er 1999). Sanctions were lifted only with respect to Exim Bank, OPIC and TDA operations, IMET programmes, loans and credits by U.S. banks (though this component never took effect because it was not specifically imposed in June 1998); and voting favourabl y for any loan or financial or technical assistance by the IFIs only to Pakistan to prevent it from defaulting on its international debt, and enable the IMF to pursue its programmes in Pakistan.

In particular, Clinton did not lift the sanctions on non-humanitarian U.S. aid to both India and Pakistan, which includes military aid, and IFI loans to India. Embargoes on dual-use technologies and the Entities List (E.L.) remained. The impact of this w aiver was, therefore, minimal. After the Exim loan sanctions were lifted, till date only one financial commitment worth about $295 million has been made to Jet Airways (India) Pvt. Ltd for the purchase of Boeing aircraft. This was approved on October 20, a day before the first waiver expired. Interestingly, in December 1998, the Exim board had approved a loan of only $201 million.

Subsequently the request was considered again in September 1999, when it was referred to Congress and finally, about $94 million more was approved in October 1999. The only Exim operation after this is the announcement during Clinton's visit of an Exim b ank's specialised line of credit of $200 million towards clean energy development projects through a memorandum of understanding (MoU) with the Power Finance Corporation.

As regards OPIC guarantees, on May 6, 1999, a commitment of $5 million was made towards political risk insurance to a small U.S. business firm, Dodson-Lindlom International, Columbus, Ohio, that is working to rehabilitate, construct and operate a 12-MW h ydropower station in Maharashtra. No further OPIC guarantees seem to have been given. Post waiver, the component of TDA programmes, which basically assist in the creation of jobs for Americans by helping U.S. companies pursue overseas business opportunit ies and compete for infrastructural and industrial projects in developing countries, only two feasibility studies worth $300,000 each to MachTech International, New Jersey, and Bechtel of San Francisco have been financed. The former is for the National H ydrocarbons Database and Archives and the latter for a greenfield oil refinery project proposed by Reliance Industries Limited. An allocation of $450,000 was made last year after the waiver towards IMET and some programmes under it are under way.

The fourth set of sanctions that was waived related to the humanitarian component of development assistance, which is essentially the bilateral aid towards USAID programmes. Much of the humanitarian component, which had to do with food and health program mes, were in any case exempt when the sanctions were imposed in May 1998. In the development assistance component, which in 1998 had been placed at $54.8 million, about $20 million had been terminated in May 1998. Of this, $8 million relating to reductio n of greenhouse gas emissions was treated as humanitarian assistance after the waiver and restored. About $12 million from the 1998 appropriation continues to remain suspended. In 1999 too this was roughly the amount that had been appropriated for USAID programmes in India. So about $70 million of development assistance towards USAID programmes has remained unutilised.

An additional $20 million has been sanctioned for a three-year extension of the greenhouse gas pollution prevention projects now. However, from the USAID programmes, for which funding was announced during Clinton's visit, it is evident that the non-human itarian component of development assistance also appears to have been waived, which authority Clinton had not exercised until he came to India. Although the executive order has not been issued yet, funding would be made available mainly to clean energy a nd environment-related USAID programmes. In this sense, the waiver may even be specifically only for such programmes.

(However, Ian Bowles, Senior Director for Environmental Affairs for the National Security Council, stated in a press briefing to visiting U.S. journalists: "Congress has given statutory authority for climate change programmes to proceed, notwithstanding other provisions of the Foreign Assistance Act that would hold up other activities. So essentially, it's saying that in the clean energy and environment area, we are lifting policy-based restrictions that do not require presidential action.")

A sum of $25 million for an Energy Conservation and Commercialisation (ECO) Project, a programme of the USAID to help promote commercialisation of energy-efficient technologies and services, was also announced. ECO will provide technical assistance and t raining to the Ministry of Power, electric utilities and regulatory commissions on policy reforms and will work to address market constraints to greater use of energy-efficient products and services.

During his visit to Bangladesh, Clinton announced a funding of $50 million towards the South Asia Regional Initiative (SARI) Energy Programme of USAID. SARI is aimed at accelerating investment and trade in clean energy technologies among South Asian nati ons including India, Bangladesh and Nepal. A fraction of the $50 million will flow into India as part of the waived non-humanitarian aid to USAID programmes but what fraction of this is earmarked for India was not spelt out.

USAID's Financial Institution Reform and Expansion (FIRE) project, designed to support the Government of India's efforts to "raise the efficiency and transparency of its capital markets to international standards," which had been suspended on August 14, 1998, has also been revived. According to a USAID press release: "Because of the importance of strong capital markets to global trade and investment, President Clinton has agreed to waive the Glenn Amendment and restart the project."

While all collaborative programmes of the U.S. Department of Energy (DoE) had been suspended following the Pena Memorandum of the DoE, some small collaborative programmes on clean energy area have been mooted. This is in the form of resumption of "bilate ral energy consultations and technical assistance on non-nuclear power sector policy reforms, and on public and private collaborative projects related to clean energy, renewable energy and energy efficiency." Similarly, on the environment front, technica l assistance by the U.S. Environmental Protection Agency (EPA) has been resumed with proposals to address air quality management, strengthening the implementation of environmental policies and regulations, risk assessment and management of priority pollu tants, and greenhouse gas reduction projects. EPA programmes too were suspended in 1998 in the context of the post-Pokhran sanctions. The Technology Cooperation Agreement Pilot Project (TCAPP), a programme co-funded by USAID, the DoE and the EPA, is also sought to be resumed. TCAPP will evolve a model for the transfer of clean energy technology as part of the Framework Convention on Climate Change.

India, not being a signatory to the Nuclear Non-Proliferation Treaty (NPT) or an adherent to or a member of the Missile Technology Control Regime (MTCR) has always been at the receiving end of export controls on dual-use items. These became more severe a nd indiscriminate after May 1998. On November 18, 1998, the U.S. Bureau of Export Administration (BXA) issued an E.L. comprising over 200 organisations that included, besides institutions under the Departments of Atomic Energy, Space and Defence, even pu blic sector undertakings and private industries. Further, in contrast to the earlier embargoes, which were specific to nuclear-proliferation (N.P.) and Missile Technology (M.T.) related items and technologies, the E.L. meant export controls on all items subject to the EAR, and implied denial even of items controlled for non-N.P. and non-M.T. reasons, including routine items.

The Defence Appropriations Act, 2000, also included the "Sense of the Congress" on the excessive nature of the E.L. Calling for more specific targeting of export control sanctions, the Act said: "The broad application of export controls to nearly 300 Ind ian and Pakistani entities is inconsistent with the specific national security interests of the U.S. and this control list requires refinement; and export controls should be applied only to those Indian and Pakistani entities that make direct and materia l contributions to weapons of mass destruction and missile programmes and only to those items that can contribute to such programmes."

Following a presidential report to Congress on entities directly involved in proliferation activities, the BXA announced the removal of 51 entities from the E.L. on December 15. However, the necessary Federal Register (F.R.) notification for the removal to take effect was not issued for over three months. The issue was taken up at the diplomatic level, but it is the critical commentaries in the Indian media that appear to have had the desired effect. Fearing adverse comments in the Indian media during C linton's visit, the U.S. administration issued the necessary F.R. notification on March 17.

For the 51 entities taken off the E.L., it meant that the earlier "presumption of denial" for import of dual-use goods (controlled for reasons other than N.P. and M.T.) no longer holds. N.P. and M.T. goods and technologies constitute about 50 per cent of the control list of dual-use goods numbering 413. Of the remaining, 85 are controlled for National Security (N.S.) reasons, 13 for Chemical and Biological Warfare (CBW) reasons and the rest for various reasons, including anti-terrorism. However, this do es not automatically imply a "presumption of approval" even for non-N.P. and non-M.T. items and applications for licence to import these dual-use goods and technologies would be considered on a case-by-case basis, including the possibility of a denial.

The March 17 notification, however, went a step further; it was perhaps as an overture on the eve of the visit. For all the Indian and Pakistani entities remaining on the E.L., applications for the import of the so-called EAR99 items would be treated on "presumption of approval" basis. But this relaxation amounts to nothing because EAR99 items are actually simple and routine items - non-sensitive, non-strategic and non-dual use - which do not require a licence to import.

In sum, therefore, Clinton has come and dangled a few baby carrots by lifting some insignificant sanctions. The substantive sanctions, namely loans from the IFIs and export controls on dual-use technologies, are still in place and the linkage of the perm anent waiver of all sanctions to the CTBT has been sounded clearly. But since the overall economic impact of the sanctions has been minimal, the decision on the CTBT need not be weighed against the post-Pokhran sanctions and their piecemeal waivers. Cli nton's visit in no way alters the basic arguments for not signing the CTBT.