Diplomacy: Indo-US Talks; Advantage USA

US sanctions against India are unlikely to work as indeed they have not against other countries.

By Manoj Joshi and Shefali Rekhi with Stephen David, K.M. Thomas and Tania Anand

The United States has a strange way of being friendly. One day it pats you on the back and follows that up the very next day with a punch in the solar plexus. That's the feeling India seems to have after being bludgeoned on November 13 with a list of 200 entities to which US firms "are essentially banned from exporting anything".

Officially the US action is a consequence of the Pokhran II tests. But coming as it does after the allegedly successful talks between the prime minister's envoy Jaswant Singh and US Deputy Secretary of State Strobe Talbott ,the action appears ill-timed and hurtful. As Gary Millholin, anti-India non-proliferation specialist notes, some of the companies listed are "already known to be connected with the Indian nuclear and missile programmes". Till now a blanket licence was required for dealing with these companies. What is new is that this is liable to be refused.

What has dismayed the authorities is that the new and vastly expanded list includes not just the facilities of the Department of Atomic Energy (DAE) and the Defence Research and Development Organisation (DRDO) but ordnance factories, the Department of Space and a slew of public and private-sector companies which do or have in the past done contract work for them.

The shock was all the more palpable because Indian officials were applauding themselves after President Bill Clinton's November 10 announcement that sanctions against India and Pakistan had been eased "in response to positive steps both countries have taken to address our non-proliferation concerns".

This unprecedented though not unexpected measure of economic coercion has left Delhi shell-shocked. "We regard this as a highly unfortunate development," the official spokesman of the Ministry of External Affairs grumbled, charging that such restrictions interfered with the "free flow of trade, technology and finance". Rajesh Shah, president of the Confederation of Indian Industry, described the action as "uncalled for, unwarranted, untimely and harmful to Indian business".

No matter what the Government of India says, the technology denial regime has been quite extensive and effective and is responsible in a great measure for the massive shortfall in the nuclear power programme's planned generation of 10,000 MW. Government and industry leaders are shying away from giving an accurate assessment of the impact of this US action. But there are areas where any US embargo on technology export will have an impact.

Primary among these are segments related to microprocessors or computer chips where the US is a dominant supplier. E.G. Tulapurkara, head of the department of aerospace engineering at IIT Chennai, points out that "in view of the small market for hi-tech products only a few companies are manufacturing them". Finding alternate sources is not impossible but it will take time and cost more since the US prices are often lower than those of their Japanese and European competitors.

In a bid to defuse public concern, Commerce Minister Ramakrishna Hegde declared that India would take up the issue with the World Trade Organisation (WTO). "They have unnecessarily targeted our companies and we are studying how best to present our case to the WTO," he said. But experts say he is probably unaware that Article 21 of the WTO allows members to deny technology on grounds of security interests. The Government's statements have been ingenuous to say the least, and have betrayed a fumbling approach that seems to have characterised its handling of the Pokhran II fallout. Anyone can see that the issue is not one of free trade, but of whether or not the US can compel India to roll back its nuclear programme.

To that end, the Bureau of Export Administration (BXA) which administers US export control policy has dramatically expanded the list of entities with whom trade is more or less banned. Till the November 13 announcement, some 100 institutions in half-a-dozen countries figured in this list. Most of these were in Russia and China, but included the Bhabha Atomic Research Centre, Bharat Electronics Ltd, Indian Rare Earths Ltd and the

Indira Gandhi Centre for Atomic Research at Kalpakkam in Tamil Nadu. The new BXA list which was formalised by a November 19 notification in the US Federal Register has added nearly 200 establishments from India alone, along with about 50 from Pakistan.

A US official who is involved in negotiations with India says that the administration had to issue the list as it is mandated by the US Nuclear Proliferation Prevention Act of 1994. "The release of this list at this time is purely coincidental," he insists. According to him, the list should have been released soon after the tests, "but we delayed the process to ensure that we made no mistakes (over the entities in question)".

Indian officials and businessmen questioned this logic pointing out that US targets include not just laboratories fabricating missiles and nuclear arms but academic institutes, ordnance factories making conventional arms and equipment. R. Ramachandran, the director of the Institute of Mathematical Studies, sums up their plaint: "There is no classified activity in this institute, so I am unable to understand why we are in the list."

Another new element in the list is the naming of a number of private and public-sector units. Prominent among these are the Kirloskar Brothers, Godrej & Boyce, Larsen & Toubro, Walchandnagar Industries, HAL, BHEL, BEML, ECIL and various plants of the Fertiliser Corporation of India. Many of these establishments have been involved in defence programmes and some have been named by US publications like Risk Report published by Millholin. But, say many of those affected, the US list has applied a stroke so broad that it encompasses entities that have no real association with defence programmes. Says D.K. Varma, chairman and managing director of Rashtriya Chemicals & Fertilisers: "Fertiliser companies have nothing to do with the heavy-water plants in India. They are installed within our units because of the cost factor." A by-product of ammonia, the heavy water is passed on to the DAE. Other companies like engineering giant Larsen & Toubro say they have little connection with military programmes today. "We supplied certain equipment to the Nuclear Power Corporation but that was five years ago," maintains S.D. Kulkarni, managing director of L&T.

US sanctions against Indian entities, especially those involved in the nuclear programme, date back to the first nuclear test in May 1974. In the '90s, the US began targeting India's missile programme. It punished India by slapping sanctions on ISRO and the Russian space agency Glavkosmos for the cryogenic rocket motor deal in 1992. Once it had gone down the path of seeking to block proliferation of weapons of mass destruction by denying technology, it was but a short step towards banning the so-called "dual use" technology. Supercomputers could forecast the weather but they could also help design nuclear weapons. Computer-controlled machines could make automobile parts but they could be used to make missiles as well.

India will obviously make efforts to break the US embargo by approaching the more accomodating Europeans. The US has roped in its allies in the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime, the Australia Group and the more recent Wassenaar Agreement to restrict weapons' technology to the less developed countries. Since the Gulf War of 1991, Russia, China and France too have joined these "clubs". But India's efforts will remain focused on Russia and France which have traditionally resisted American blandishments and have taken a more relaxed approach to Pokhran II tests.

But trade is a two-way street and the latest restrictions will hurt US companies as well, especially when Indian entities shift to their European and Japanese competitors. In the mid-'80s, as a US National Academy of Sciences study shows, the US lost some $7 billion per annum due to sanctions resulting in job losses for two lakh Americans. Beyond the issue of profit and loss are questions about the Atal Bihari Vajpayee Government's negotiations with the US. If, as observers like Milhollin believe, the controls are likely to be reviewed only if India signed the Non-Proliferation Treaty, the Singh-Talbott talks are a charade.

Ostensibly they are about compromise through reconciling India's security concerns with the non-proliferation goals of the US. But the recent signals, Talbott's own remarks and the US ban on all Indian defence entities seem to suggest otherwise. Taken together with the gamut of American laws that block hi-tech trade with India, it appears that the US is determined to put not just the Indian nuclear genie back into the bottle, but India Inc as well.

AMERICA'S HIT LIST: A SAMPLER

Godrej & Boyce Mfg., Mumbai: Godrej & Boyce, well known for steel furniture, has been supplying equipment for isro. The ban could affect its joint venture for white goods with GE. Says MD Jamshyd Godrej: "It only formalises what the US has been doing for a long time."

BHEL, Delhi: The PSU giant is surprised. Some technology it uses from the US came from agreements two decades ago. GE may lose if it backs out of a renovation and modernisation agreement with BHEL.

Walchandnagar Industries, Walchandnagar: Anticipated the American action as it makes components for nuclear reactors. On the US blacklist for years and unsuccessful in entering into a joint venture with a Japanese company.

Kirloskar Brothers, Pune: Is a brand-name in pumps and compressors. In the list for supplying sodium pumps for nuclear reactors. The company may have to import from elsewhere the Rs 6 crore worth of machine tools it has been getting from the US.

Aeronautical Development Agency, Bangalore: Designed India's ambitious light combat aircraft, a project that was a showcase of Indo-US cooperation in military hi-tech. The US has impounded some equipment and expelled Indian engineers who were in the US at the time of Pokhran II.

Institute of Mathematical Sciences, Chennai: Funded by the DAE, it wasn't expecting the ban. Transit US visas for two scientists en route to a conference in Vancouver were delayed in August. Director R. Ramachandran says the ban may affect future imports of faster and newer generation computers.

BEML, Bangalore: CMD K. Aprameyan maintains there is no need to press the panic button since "most of the equipment we make is indigenised". But the future of this defence PSU's collaboration with the US-based Komatsu Mining Systems for dumpers and excavators is clouded.

HAL, Bangalore: Sanctions slapped on the aerospace and engine divisions of the defence PSU. A major chunk of HAL's defence links are with European companies but there could be problems with the company's technical collaboration with the US-based AlliedSignal and Boeing.

IIT, Chennai: Aerospace Engineering faces a ban in supply of US-made pressure transducers, very high performance computers, vacuum pumps and sensors. Department head E.G. Tulapurkara says research will continue but quality could be affected.

Larsen & Toubro, Mumbai: CMD S.D. Kulkarni is surprised. "US companies supply to nuclear power plants around the world as well. Why the ban on us?" he asks. The Hazira unit listed makes equipment for refineries and fertiliser plants. L&T imports US steel for the unit but he feels this will not be affected.

Auro Engineering, Pondicherry: This one doesn't care. Says Director M.M. Patil: "We can afford to ignore the ban since exports to the US are about Rs 1 crore and that too without any firm commitment." Auro Engineering makes high precision equipment and exports aircraft components to the US.

Rashtriya Chemicals & Fertilisers (RCF), Mumbai: Only heavy water units are covered. This has nothing to do with the fertiliser plants which are of Italian and Danish origin. Though some equipment of US origin is needed, RCF feels it can obtain it from elsewhere.