Countering CAATSA: How India can avoid American arm twisting

In its endless obsession with bringing the Russian economy to its knees, the United States has deployed its latest weapon. CAATSA - or the Countering America's Adversaries Through Sanctions Act - allows the US to punish Moscow's military partners on the basis that their business dealings violate American law. As the largest user and buyer of Russian weapons, India is vulnerable to Section 231 of the new law, which imposes sanctions on individuals and countries that deal with Russia's intelligence and defence sectors.

Days after India inked a $5.4 billion deal with Russia to buy the S-400 missile defence system, US President Donald Trump said India would "soon find out" whether the US was going to slap punitive sanctions. Asked when, he replied: "You will see. Sooner than you think."

However, Trump's threats lacked the sting that was once typical of American presidents who looked at India through Cold War tinted lenses. Being a businessman, he's always looking for a deal. Soon enough, US officials are believed to have approached Defence Minister N. Sitharaman with an offer - New Delhi could avoid sanctions if it agrees to buy the F-16 fighter as a quid pro quo.

Catch-22 for India

Because CAATSA is an American law that prevents global free trade, it is patently illegal and can be challenged. Nevertheless, if enforced it could choke the supply of weapons from Russia and blow a gaping hole in India's war fighting capability. It will also earn India considerable hostility in Moscow and drive the Russians closer to Pakistan and China, creating a different set of complications.

Secondly, any American interference in India's fiercely independent defence procurement policies will create a backlash in India and torpedo the growing strategic and defence partnership between New Delhi and Washington.

India could thus end up in a Catch-22 situation in which it loses either way - whether the country abides by CAATSA or not. Sanctions under CAATSA would be triggered once Delhi makes a payment for the Russian equipment. The sanctions include blocking of licences and permissions for a US entity to export a significantly large number of items to India. The restrictions on this front would include any arms sale or the transfer of nuclear equipment or technology.

What's at stake?

Not even the most optimistic American hawks are expecting India to walk away from Russia immediately. As one of the biggest customers of the Russian armaments industry, India will have tremendous difficulty scaling down its ties with Moscow. More than 70 per cent of the weapons fielded by India's armed forces and 60 per cent of the country's defence imports are of Russian origin.

Significant weapons deals such as the $6 billion Sukhoi Super 30 upgrade, the $5.4 billion S-400 deal, highly successful projects such as the BrahMos supersonic cruise missile, and secret collaboration in the area of nuclear powered submarines, miniature nuclear reactors and aircraft carriers, all point to the deep defence ties between Moscow and New Delhi dating back over 50 years. In this backdrop, nobody expects India to abandon its defence ties with Russia, even if economic and people to people ties have cooled considerably.

The assessment is also shared by the Americans. The strain CAATSA could place on the resurgent India-US relationship was in focus at a hearing of the US Senate Armed Services Committee in March 2018. Admiral Harry Harris, the former commander of the US Pacific Command (now IndoPaCom), said: "Seventy per cent of their military hardware is Russian in origin. You can't expect India to go cold turkey on that. I think we ought to look at ways to have a glide path, so that we can continue to trade in arms within India."

His comments were made in the context of US Secretary of Defence James Mattis seeking exemptions from Section 231 for a number of US partners and allies. India is believed to be part of this list.

The general consensus in the US is that both houses of Congress would have to consider ways to give a waiver to India. The main reason why the US is going easy on India - at least for the moment - is that Washington and New Delhi are in the process of working out multiple nuclear power plant and arms sale projects. As Admiral Harris remarked, India is "a key partner and a great strategic opportunity". Translation: India has deep pockets and the US need the money to keep its factories running. Pissing off India isn't good politics.

Simply put, applying CAATSA against India could put the US foreign policy and defence establishments in a bind and slow down their expanding cooperation with India.

How can India respond?

India isn't Saudi Arabia or Britain that the US can push around; it is poised to be the world's third largest economy. Due to India's large market and manpower, it is the US that needs India more than the other way round. Instead of getting into a heated diplomatic scrap, India should explore ways to sidestep CAATSA's punitive measures in a number of ways.

1. In the immediate term, one way to avoid secondary sanctions would be if the US determines that India is reducing its dependence on Russian arms. On paper at least it appears so - according to the Stockholm International Peace Research Institute, "Russian hardware represented 62 per cent of the country's total weapons imports during the past five years, compared with 79 per cent in 2008-2012."

2. India may seek an official declaration from the US, specifying that anti-Russian measures would not be used against Indian companies.

3. India should enact its own legislation which declares that decisions based on extraterritorial foreign laws that prevent free trade are unlawful and therefore not applicable to it.

4. New Delhi can complain at the World Trade Organization and threaten counter sanctions to protect its legitimate interests.

5. India's leverage as the world's second largest weapons importer needs to be communicated clearly to the Americans because clearly they keep forgetting this fact. Prime Minister Narendra Modi has an ambitious $250 billion plan to modernise India's military and a hefty chunk of that amount will go to buy advanced weapons. The US - which has been the biggest beneficiary of India's arms diversification programme in the past two decades - will end up as the biggest loser if it slaps sanctions.

Sanctions: Silver lining

In 1992 when India was facing difficulties in procuring Russian spares for its defence forces, Prime Minister P.V. Narasimha Rao dispatched Foreign Secretary Mani Dixit on a fact-finding mission to Moscow. However, the new Russian Foreign Minister Andrei Kozyrev refused to meet Dixit. The atmosphere was further aggravated by Kozyrev's statement that henceforth Moscow would have an "equidistant" policy in relations with India and Pakistan and that Russia would "stop looking at Pakistan through Indian goggles". This new stance was known as the Kozyrev Doctrine.

It was this diplomatic snub that forced Rao to steer India towards the West and kickstart diversification - a process that has continued to this day. The moral of the story is that the Kozyrev Doctrine may have been a stab in the back by a trusted friend but it opened India's eyes to the dangers of dependence on one country for critical defence supplies. India has since stepped up the pace of both diversification and Make in India, resulting in impressive gains on both fronts. However, the pace of indigenisation hasn't been enough as the defence forces continue to depend on imports of advanced weapons.

Similarly, CAATSA could be the much needed wakeup call India needs to fast-track Make in India. For, diversification has its limits. Even if India decides to spread its imports evenly between Russia, the US, Israel and Europe, the reality is that all four are interlinked. For instance, Israel is touted as a reliable arms supplier and also a country with shared strategic interests. However, a number of Israeli weapons systems such as the Green Pine radar incorporate American technology at some level. This gives the US leverage against Israel, which may be arm twisted to apply sanctions on India. Although Tel Aviv has always stood by India during wars, its future stance cannot be predicted with certainty.

By fast tracking indigenisation, India can ensure self-sufficiency in defence and become immune from sanctions conjured out of thin air by policy wonks in the US State Department.

Changing winds

New geopolitical developments are also in India's favour. With the US creating a new Indian Ocean-Pacific Ocean command (the aforementioned IndoPaCom) to take on China's growing naval power, Washington needs India as a strategic partner. The new command replaces the Pacific Command, indicating the importance of having a larger US naval presence in the Indian Ocean.

While Japan and Australia are the lynchpins of the American plan to contain China in the Pacific, in the Indian Ocean it is India that is the key to cornering the dragon. New Delhi should use this leverage to squeeze all the waivers it can to nullify CAATSA.

If India plays its cards right, America's brand new weapon could simply fizzle out.