Diplomacy: Indo-US Ties: A New Loan

The formalisation of sanctions takes relations between the world's two great democracies to new depths.

At the best of times us secretary of State Madeleine Albright is pugnacious, at the worst of times she can be positively vitriolic. Speaking at Washington's Stimson Centre on June 10, she described the nuclear tests in the subcontinent as "a felony against the future". Two days later, speaking to CNN from London she sought to dispel a growing impression in the US that sanctions are an overused and ineffective instrument of recrimination. "It's all sticks and no carrots," she assured.

Albright's combativeness proved infectious. Last Thursday, when Deputy Secretary of State Strobe Talbott announced the US administration's punitive measures against India, his tone was positively menacing. "The path down which India and Pakistan have started to move with these tests is a dead end and no one else should follow down that path." The measures would be a warning to all "would-be nuclear-testers".

The US strategy is centred on pressuring India to roll back its nuclear programme to the pre-Pokhran II level. But determined not to lose business advantage by imposing unilateral sanctions, the US is using its enormous clout to marshal forces in the Permanent Five (P-5) of the UN and the Group of Eight rich nations to arm-twist India by denying development loans.

According to the State Department announcement, exports of nuclear and missile technology would be restricted (which they actually have been for the past 20 years), licences for the export of hi-tech equipment for military and civil use, estimated at some $300 million (Rs 1,260 crore), would be on a case-by-case basis (which is no different from the pre-Pokhran period). In addition, the US "halted any commitments of US Government credits and credit guarantees by US Government's entities", including the US Overseas Private Investment Corporation and the US Export-Import Bank. Private banks too would be prohibited from lending to the Indian Government. All in all, a formidable range of measures that Delhi lost no time in describing as "coercive" but "counter-productive".

Talbott's announcement was the climax of a series of elaborate diplomatic moves to browbeat Indi First, Washington got the P-5 to meet in Geneva to condemn India and Pakistan and demand they sign the Non-Proliferation Treaty (NPT) as non-nuclear weapons states. Then, on June 11, the G-8 announced it would gang up to oppose loans by international financial institutions. Finally, Albright has made it clear that she intends pushing Kashmir to the global agend "I think international attention on it will help."

US actions do not as yet indicate a fatigue with its policy of unilateral sanctions. The US has imposed sanctions 104 times since World War II and an amazing 61 times since President Bill Clinton came to power. India is one of the more "sanctioned" countries, having faced restrictions on all nuclear materials since 1978 and on missile-related goods since 1985. With past experience, the US is not unaware that as time passes sanctions begin to lose their sting. "It is clearly testing India's ability to take the heat," says a senior Ministry of Defence official. As an example he cited US rules limiting the export of computers to machines capable of up to 20 MTOPS (million theoretical operations per second) in 1984-85. "Today the limit is 1900 MTOPS, just 100 below the capability of the domestic PARAM supercomputer," he says.

Since it appears to be working on a policy designed to get quick results, US pressure will increase. Action is likely to focus on the roughly $1 billion (Rs 4,200 crore) worth of loans that would have been cleared this summer had Pokhran II not occurred. So far the G-8 has only deferred decision on the Indian proposals. It may up the ante by calling for their consideration and voting them down. Since this year's disbursals have already been approved and are not targeted, the impact of such a decision will only be felt next year.

Albright's description of India's security concerns as "dangerous nonsense" remains at the root of Indo-US problems. With its avowed pro-Beijing tilt, the White House simply discounts the China factor mentioned by Prime Minister Atal Bihari Vajpayee in his letter to Clinton. On June 12, Gordon Oehler, former director of the CIA's Non-Proliferation Centre told the Senate's Foreign Relations Committee that the White House had systematically ignored intelligence inputs on China's missile trade with Pakistan, a charge echoed by right wing Republicans on Capitol Hill.

India's blunt response to the US came through Vajpayee's comment to the Washington Post at the end of last week, reiterating India was a nuclear weapons state. But he made it clear that India would have a limited arsenal designed to deter the use of such weapons. This assertion was sought to be countered by Jane's Defence Weekly, which claimed India had the potential of outstripping Britain and France in nuclear capability.

Earlier in the week, an Indian spokesman attacked the G-8 for offering "unrealistic prescriptions, couched in the language of pressure". For now, Washington and Delhi are working along lines of strategy that remain on parallel and not converging tracks.

India's calculations are that the US will gradually begin to re-engage India -- perhaps over the next year or so. The US has by far been the largest foreign direct investor in India having brought $10 billion (Rs 42,000 crores) into the country since 1991. However, to drive home the fact that the country is no pushover, India may have to take recourse to some imaginative diplomacy, including strategic alliances with those on Capitol Hill who hate Clinton and China equally. There are already whispers of South Block employing powerful lobbyists with strong Republican links. Bob Dole's name has been mentioned in this context.

A more substantial answer may well lie in a suggestion by Harbir Singh, chairman of the management department at the Wharton School. India, he believes, should enhance its "relative attractiveness as a place to invest in". He feels that once the "political risks are reduced from the current high" foreign investment flows will resume. Unless they wish to sign on Clinton's dotted line, Vajpayee and his Government have their work cut out for them.

INTERVIEW: RICHARD CELESTE
"Let's try some old-fashioned diplomacy"

Senior Editor Manoj Joshi spoke to Richard Celeste, US Ambassador to India, on Indo-US relations. Excerpts:

Can Indo-US relations be dug out of the hole they are in?
I would not describe them as being in a hole. Rather this is going to be a test of the determination on each side to accord priorities to our relationship.

What does the US want in the relationship?
I believe the US first wants a value-based relationship with India. One that achieves much higher levels of candour and sharing on our respective concerns about security and long-term developments.

Is the US being deliberately provocative in introducing China into the South Asian issue?
The US has energetically pursued a policy of encouraging China to respect international norms on non-proliferation and human rights and it has engaged the Chinese in very candid discussions.

Is China to play some sort of a mediatory role?
I don't believe that the US believes there is any more value to China serving as a mediator between India and Pakistan than the US would. We do believe that China first has a responsibility not to transfer technology to Pakistan or to anyone else that would exacerbate the nuclear arms race. For Indians who see some kind of mischief in the relationship between China and Pakistan, it's important to engage China constructively to resolve these issues.

What are the immediate steps the US wants India to take?
Sign the CTBT, adhere to the terms of the NPT, halt production of fissile material. We acknowledge that India has already taken some positive steps in this direction. India and Pakistan should not place nuclear warheads on their missiles. Most of all we hope India and Pakistan begin face-to-face talks at a high level on security concerns which each have raised, including Kashmir.

When you talk of CTBT or NPT, you want to roll back India to a pre-1974 position. Is that realistic?
I think we have to start where we are, have conver- sations that don't take place through columns of magazines or headlines of newspapers. But perhaps through some old-fashioned diplomacy and common understanding.

So the US does not buy the argument the tests were motivated by India's security concerns ...
We respect the right of the Government of India to take a decision about what is necessary for its own security. We do not doubt that security concerns were a major motivating factor. We, however, disagree about whether this step has actually enhanced India's security.

Is there any way the US can go beyond punitive sanctions to address India's concerns?
I don't want to accept the premise that what we have is a punitive policy. The delay in the implementation of sanctions has been occasioned by the American desire to be firm and correct in the application of sanctions, not to be punitive, not to try and somehow beggar the Indian economy.