At the same time, there is increasing disquiet in Russian defence circles at the recent lack of progress on defence cooperation with India. The threat of US CAATSA sanctions has introduced considerable uncertainty about even ongoing projects. Russian exporter Rosoboronexport claims an Indian order book of over $4 billion, but there have already been payment disruptions due to Indian banks’ fears of attracting US sanctions (even before a sanctions regime is in place!). Russian officials also point out (privately) that though many big projects have been talked about, not a single major defence deal has been concluded in the last four years. The healthy order book consists mainly of repeat orders, upgradation of existing platforms, ammunitions and R&M of equipment. The S-400 air defence system would be the first major deal – and would be big enough to compensate for the recent relative drought, if it is finalized.
The applicability of CAATSA to India has been a subject of debate within US official and Congressional circles and between India and the United States. The latest US Defence Authorization Act holds out the possibility of a waiver of applicability of CAATSA to India, subject to a Presidential certification to the US Congress that India is significantly reducing its dependence on Russian arms and is “cooperating with the US government on other matters that are critical to US strategic national security interests”.
While in theory, this provides the basis for “exempting” India from application of CAATSA, the practice is likely to be far more complicated, as indicated by various statements emanating from the US. In a recent detailed briefing to a Senate Committee, an Assistant Secretary in the State Department stated clearly that, while provision of spare parts or maintenance of military equipment would not attract CAATSA, a “qualitative upgrade in capability, such as an S-400” would. He went on to clarify that the waiver language is “narrow – to allow countries … that we wish to buy American military equipment to be weaned off Russian equipment”.
This clarification confirms the impression that the fundamental objective of CAATSA is as much the opening of markets for American military equipment as the “punishment” of Russia. This might explain the fact that nothing is being said about the applicability of CAATSA to China, though that country imports major equipment from Russia. The conditions for the waiver also imply that to obtain a Presidential certification, India may have to provide details, explanation and justification of virtually every major equipment to be obtained from Russia – a proposition not likely to be palatable to either India or Russia.
The challenge for India is encapsulated by reported remarks of US Assistant Secretary of Defence, Randall Schriver, who was recently in Delhi for preparatory meetings for the forthcoming India-US 2+2 meeting: that “the impression [in India] that we are going to … insulate India from any fallout from [CAATSA] ... is a bit misleading. We would still have very significant concerns if India pursued major new platforms and systems (from Russia)”.
Tough negotiations may, therefore, be expected on this subject at the India-US 2+2 in New Delhi on September 6. Given the strong commercial motivations behind CAATSA and the emphasis that President Trump has consistently placed on trade issues in every bilateral relationship, Indian negotiators may consider whether a more lenient US posture on CAATSA (and, for that matter, on Iran) could be obtained in exchange for significant concessions on trade and other economic issues under bilateral discussion with the United States.
August 30, 2018