What is the issue?
- The controversial “CAATSA Act” of the U.S. is proving to be a stress point in Indo-U.S. bilateral ties.
- While there is hope that India will get certain exemptions, the larger picture remains dull.
What is CAATSA Act and how does it affect India?
- “Countering America’s Adversaries through Sanctions Act (CAATSA)”, is a U.S. law that seeks to constrain its enemy powers economically.
- Through this law, U.S. imposes economic sanctions on its adversaries and all countries and firms dealing with its adversaries.
- Considering the economic might of the U.S., it would be a big challenge for any nation to overlook U.S. and continue its trade with other partners.
- U.S. has classified Iran and Russia (and North Korea) as adversary countries, but India has strong and critical trade ties with both these countries.
- Notably, Russia is India’s major defence supplier for over 6 decades now, and Iran is India’s second largest oil supplier.
- Hence, if India doesn’t cut trade ties with Iran and Russia, CAATSA Act would’ve kicked in U.S. sanctions against India.
- This has put India in a tight spot as it can neither dare U.S. sanctions nor antagonize Iran and Russia (or forego supplies from them).
What is current status?
- Indian Argument - Indian delegation argued that Russian defence equipments were indispensible at the current point in time.
- Further, they argued curtailing defence ties with Russia would affect India’s capabilities within the Quad Coalition which also has U.S.
- Notably, Quad is an Asia-Pacific security bloc that has Japan, Australia, India and the U.S. as members.
- Further, it was stressed that India has been reducing defence purchases from Russia over the years and simultaneously increasing purchases from the U.S.
- The result - The Congressional committee looking into the issue seems to have relented as the need for waivers to some countries was recognized.
- The committee has proposed amendments to CAATSA, in order to allow the President to waive sanctions in certain circumstances, for six months at a time.
- So, as long as the president signs waivers for India every six months, it can continue to engage in trade with countries like Russia.
How does the future look?
- CAATSA was a major irritant in the bilateral relationship, and the current waivers are likely to ease the situation considerably.
- Nonetheless, the risk of sanctions against energy trade with Iran still looms large, which could revive tensions.
- The standoff at “World Trade Organisation” (WTO) over tariffs and counter-tariffs the two countries have imposed on each other is another stress point.
- Given the capricious and unpredictable policy swings Mr. Trump has shown, it will be prudent for India to not presume that CAATSA waiver solves all issues.
Source: The Hindu
