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.
