June 22, 1998

Finger-wagging has given way to finding solution as India's damage-control exercise gets underway.

By Sudeep Chakravarty and Manoj Joshi

Sometimes, people in diplomatic trenches have their moments of weakness. Occasions when they are even willing to admit to what it's been like these past weeks since the nuclear tests. This is one of them. Seven meetings with top officials in the US State Department in the three weeks, nearly 50 on Capitol Hill, endless forums with media, investors, businessmen, community leaders, anybody who was willing to meet them and listen to their point of view. "I don't think we have ever worked so hard," says India's Deputy Ambassador to the US T.P. Sreenivasan.

He probably wouldn't want to know the number of hours put in by colleagues back at South Block. After the initial fumbling and deliberately low-key response, Delhi's approach has since mid-May become more calibrated and reasoned. No flashes of self-righteous temper, a firm message to ultra-swadeshis to stop attacking property of US multinationals. The result: a lowering of temperatures as the world moves to adjust with the reality of India's Pokhran statement.

Traveller's Tips: Look Sharp, Tread Easy

The approach has changed from being pushovers to working a push-factor, from scrambling around blindly to making deals -- give an inch, buy a mile, give a mile, buy peace and a better position.

This past week, two special envoys of Prime Minister Atal Bihari Vajpayee, Deputy Chairman of the Planning Commission Jaswant Singh and Principal Secretary to the Prime Minister Brajesh Mishra made trips to New York and Washington, London, Paris and Moscow, talking to ministers, media, business, pressing the flesh and making points. Behind these high-profile meetings was a relatively ignored one, a week-long mission to the Gulf states ending June 4 by Secretary (East) in the Ministry of External Affairs (MEA) Nareshwar Dayal and Joint Secretary Talmiz Ahmad, who visited Oman, United Arab Emirates and Qatar and followed up last week with visits to Kuwait and Bahrain. "The challenge to Indian statecraft is to be able to carry conviction about its sovereign concerns on issues of national security," Singh told India Today about the purpose of the missions. "The principle of equal, legitimate security is uniform in its application. What applies to one applies to all."

It's worded in Singh's typically wooden and proper style and alludes, among other things, to provisions in the Comprehensive Test Ban Treaty (CTBT) that India -- like Pakistan -- refuses to sign. But the brief was also to break through the gradually softening but still strong US government stand and talk to American opinion makers, the United Nations, and articulate India's case for conducting the tests. He also met Acting Secretary of State Strobe Talbott -- Secretary of State Madeleine Albright was away in London attending the G-8 meeting -- a sign to show that ire and all, Singh was being received at an appropriately high level.

More secretive in his movements, Mishra, for his part, arrived in Moscow for talks with Russian Foreign Minister Yevgeny Primakov and President Boris Yeltsin's National Security Adviser Alexander Kokoshin to discuss ways to deal with the nuclear issue. He had already done the rounds of France and the UK, having met with President Jacques Chirac and Prime Minister Tony Blair. Russians, like the French, would have relatively few problems with India's nuclear weapons, but they have been rattled by Pakistan's tests; Russian officials are telling their Indian counterparts their worry is in the context of their "near abroad", the Russian term for their southern neighbours which were once part of the erstwhile Soviet Union. Mishra's visit to Moscow was also to thank the Russians for ensuring that earlier meetings of the big powers in Geneva and the Security Council in New York did not contain any measure, especially on Kashmir, that Delhi would find difficult to live with.

Singh and Mishra didn't go on the defensive, but tried to make the developments understood from the Indian Government's perspective, while holding out carrots of business over belligerence. "It's too early to see a major impact, but this kind of dialogue at a very high level is very promising," says Marshal Bouton, executive vice-president of the Asia Society in New York, which hosted a seminar for Singh.

The Result Factor: Working Up To B+

Meanwhile, Delhi decided on some hard-ball itself. A statement issued by the official spokesman on the eve of the G-8 meeting bluntly called on the big powers to talk to India and not at it. "We urge these countries who claim to speak on behalf of the international community," the statement archly suggested, "to take note of the unilateral gestures made by India in recent weeks." This was in reference to Delhi's commitment to end nuclear testing, offer to enter negotiations to cut off the production of fissile material (Fissile Material Control Treaty or FMCT) and maintain strict export controls on nuclear materials, as well as to talk to Pakistan unconditionally. "We would expect a positive response to our initiatives," the statement said, "rather than prescriptive and coercive suggestions."

This was deliberate, some things dovetailed nicely, like when the roadshow to the Gulf received an unplanned, welcome boost. The mission to the Gulf was to first and foremost ensure that Pakistan doesn't succeed in demonising India or in selling the idea that a nuclear India was a threat to the Islamic world, especially this oil-rich area; Pakistan's Prime Minister Nawaz Sharif had just swung through the region on quite the opposite mission. The Indian tack worked, countries like Oman were plainly more interested in finding out about the fate of the fertiliser and refinery project that it had a stake in, and in meetings with officials, leaders like Sheikh Abdulla bin Zayed, information minister and son of the ruler of the UAE, stressed that it would be "business as usual" with India as far as the Gulf states were concerned.

If this move went well, the icing came inadvertently, and was used to the maximum. Well before the nuclear tests were planned, the Indian Navy had planned a series of exercises with some navies of the region. Between June 1 and 9, a flotilla comprising three frigates and one submarine held separate exercises with the navies of Oman, Saudi Arabia and Iran. The net message to the Islamic world: if India were such a threat, would we conduct military exercises with this country?

This sort of quick-footed strategy is now being played to the hilt to get ahead, and Indian business is playing a major role in it, in the roadshows it has planned, and already undertaken -- largely without any fanfare whatsoever. Last week, Finance Secretary Montek Singh Ahluwalia made a public appeal while addressing senior officials of the Associated Chambers of Commerce and Industry (ASSOCHAM), saying industry associations should forcefully put across India's case to "countries imposing sanctions" that India offered a vast market. He also said he hoped that with the "ongoing diplomatic initiatives supplemented by efforts of the Indian business community", the situation would change.

Truth is, it's been on practically since the Day After. Leading businessmen and top officials of the Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce & Industry (FICCI) and assocham, were briefed by officials of the PMO. Subsequently, the think-tank approach has narrowed down mainly to the CII, on account of its wide network of overseas offices and a cut-through-the-muck approach to doing business.

Between them, CII and FICCI officials have already travelled to Japan, Korea and the US. And the CII for its part plans to take organised roadshows starting later this month to the UK, Japan, France and the US -- insiders say that Vajpayee has specifically asked CII President Rajesh Shah, whose father Viren is a senior BJP functionary, to head a team to the US. Finance Minister Yashwant Sinha told India Today recently that once Parliament adjourned on June 12 for a three-week break, he and officials of his ministry would "go out to market economic policies".

Two-In-One Deals: It isn't just clever, it's the way

The deal with Suzuki Motor Company is a prime example of how, like the Gulf naval exercise, two objectives were achieved with one move. The Indian Government was facing certain defeat in its last appeal in front of international arbiters to keep Suzuki representatives out of key positions in Maruti Udyog, in which it holds half the equity (see detailed story). It was also perceived as a major thorn in Japanese business interests in India. By letting Suzuki exercise its right as an equal partner in management, the company is looking to being saved with fresh input of technology and capital, India has scored a pr victory with a nation which is seen as a "problem country" by Indian officials.

As of now, Japan has cut off all official contacts with India -- besides choking close to a billion dollars in aid and yen-denominated loans. The uncharacteristically tough Japanese line is being seen as a result of Prime Minister Ryutaro Hashimoto's personal influence. "Japan," says Brij Tankha, head of department of Delhi University's Centre for Chinese and Japanese Studies, "sees the events as a call to exercise its leadership in Asia."

The swift fund cuts were expected, but within days Japan raised the ante by calling for an international conference on Kashmir. "They had originally agreed to project Kashmir as a sop to Pakistan to prevent it from testing," says a mea official. "But they seem to have retained it for pressuring India even after the Pakistani tests." Now officials hope the Japanese will find less reason to project power, economics winning over politics in much the same way it was moved to lift its sanctions on China in 1996 in less than a year. When the CII roadshow hits Japan, this will definitely be one of its moves, conveyed through top echelons of Japanese industry which hasn't once, right through the reaction, declined to meet Indian business emissaries.

Listen Up: Business May Know Best

It's been exactly the same with the US. In fact, this network has worked overtime to get to the bottom of solutions. Even before Singh's roadshow hit American shores, the situation was primed. US companies in India went into huddles with Indian counterparts, even as organisations like CII and FICCI started tapping their connections worldwide to get feedback. On June 4, at a behind-closed-doors Washington meeting of the US-India Business Council, under the international division of the influential US Chamber of Commerce -- live video conferences with Singh and Sinha were part of the day's agenda -- the views were clear. India had a lot to do to give US business grounds to leverage their government, among them insurance, transparency in investment, proper execution of fast-track power projects, explaining the reason behind duty hikes in certain areas and not others.

But sanctions were certainly a no-no. George Munoz, president & CEO of OPIC, the semi-government agency that provides political risk insurance to US companies abroad, was pretty clear in his message. "The world changes fast, so it's important not to tie our hands with legislation, which should change with reality." Tom Donahue, president & CEO of the Chamber, sounded the same alarm US businesses had done for weeks: other countries will take advantage and expand trade. In a message to both the US and Indian governments, he said, "Look ahead for constructive resolution for this phoney issue."

That's exactly the sort of language that emissaries like Singh and Sinha, and those who come after, hope to hear. The results will really depend on how well India Inc navigates the road. It isn't straight, and as of now still quite narrow.

--with Arthur J. Pais in New York and Tania Anand in Washington

WAY OF THE DEAL

Over the past two weeks,top executives of Indian and foreign companies and banks have met top Indian chambers of commerce in Delhi and Mumbai for closed-door discussions. This is a sampler of who said what, and why

What US Interests Say

• Indian business should focus on the Indian Government, and let American business focus on the American Government. Play down political hype, talk business to increase stakes. US insurance companies have been unable to do business in India for the past 2-4 years. Why should they put pressure on the US Government? Back in the US, stakeholders for China are many, much less for India. India should implement reforms, open up. That will help balance stakes.
• US companies are more concerned with issues of terrorism and security with Pakistan than the sanctions alone. President Bill Clinton hasn't yet cancelled his visit to India. The visit should go ahead, and should not be cancelled or postponed.
• There's no clarity about which agency will implement the sanction law. US banks are lobbying against the Office of Foreign Assets Control of the Treasury Department issuing guidelines. Sanctions' definitions and interpretations are unclear so there wouldn't be any real effect till this is done. Indian business has to ensure that there isn't any public retaliation even after executive orders for sanctions are issued. This will help to better leverage US Government.

What Others Say

• European banks aren't really talking about implications of sanctions. They are pitching for change, reform and benefits much like any other foreign bank. Feedback from French institutions is not to mix economic issues with domestic political issues, detach rhetoric from economic policy statements.
• Strong public reaction in Australia forced the Government to take action; anti-nuke movements like Greenpeace are very strong in Australia. The tone is being cooled now. The message from the UK is that no "civilian business" will be affected. A major Belgian mission planned for November which includes the country's most influential corporation, Fabrimetal, is on. Business in Italy is treating tests as a political exercise.
• With the cooling of rhetoric, there is active consideration to discuss lifting of sanction on grants and aid, which total nearly $1 billion before the year is out, earlier than a similar sanction imposed against China in 1996 was lifted. The Suzuki deal in Maruti Udyog will help enormously in creating goodwill.
• Representatives of international rating agencies Standard and Poor (S&P) and Moody's are both due to visit India this month. It might prove to be critical at this point, especially with S&P already having downgraded Indian debt. A turnaround in perception of policy is required to upgrade rating and benefit from its domino effect.

--Sudeep Chakravarti

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