New U.S. Sanctions Pose Dilemma for India’s Defense

 - May 18, 2018, 9:16 AM

A request for proposal released this month to Russian Helicopters by India for co-producing 200 Kamov Ka-226T helicopters, a deal to be signed on two S-400 air defense systems, and another one on Russian frigates could be in jeopardy following the August enactment of a new law, “Countering America’s Adversaries Through Sanctions Act” (CAATSA). Alternatively, U.S. ambitions to sell India fighter aircraft, maritime surveillance UAVs, and naval utility helicopters could be thwarted.

Titles I and III of CAATSA are directed at Iran and North Korea. But Title II is aimed at “Countering Russian Influence in Europe and Eurasia.” CAATSA, therefore, imposes new sanctions on those engaging in transactions with the intelligence or defense sectors of the Russian Federation. The law will also directly affect Indo-Russian partnerships such as Brahmos Aerospace.

The list of 39 Russian entities subject to sanctions under CAATSA includes Almaz-Antey Air and Space Defense, Rosoboronexport, Rostec, Russian Aircraft Corporation MiG, Russian Helicopters, and United Engine Corporation. All of these companies do business with India.

Russian equipment accounts for 68 percent of India's military inventory, meaning spare parts and servicing of existing equipment and licensed manufacture done in India will be at risk.

"Imposing CAATSA would be detrimental to both the U.S. and India. Sanctions would set the relationship back significantly. That’s the point we’re making with both governments,” Vikram Mahajan, director of aerospace and defense for the think-tank U.S.-India Strategic Partnership Forum India (USISPF) told AIN. "Punishing India with sanctions would be a mistake for the greater defense partnership and we need to find alternative solutions," tweeted Mukesh Aghi, president and CEO of USISPF. Should India opt to continue doing business with Russia—a likely scenario—licenses of U.S. defense companies in India will be suspended and U.S. equity in India banned.

“India is now between the devil and the deep blue sea. If India opts to do business with Russia, it loses out on spares and services from the U.S. on equipment already purchased such as the Boeing P-8I maritime patrol aircraft and the Lockheed Martin C-130J,” said a senior MoD official. However, with no “force majeure” clause in those contracts, U.S. defense companies will be considered defaulters according to India’s Defense Procurement Procedure, resulting in heavy fines.

“This issue brings us back to the issue of trust that took so long to build between the two nations,” said an Indian MoD official. He noted that India has not yet signed two foundational agreements for defense cooperation with the U.S.: the Communications Compatibility and Security Agreement, previously known as the Communications and Information Security Memorandum of Agreement, and Basic Exchange and Cooperation Agreement. The two are necessary for India to access communication security equipment on imports from the U.S. and sharing geospatial information, respectively. “India never fully trusted the U.S.,” the official added.

The official told AIN that anxious talks are being held with the Russians “on ways to get around” CAATSA because as India was nearing the purchase of the high-end Russian S-400 air defense system, a capability that the country cannot obtain from elsewhere.

“India warrants an exemption from these secondary sanctions, as does any country with which the U.S. is forging new and strategically important defense relations,” said the Carnegie Endowment for International Peace. U.S. Secretary of Defense Jim Mattis last month called on Congress to grant national security waivers to CAATSA. “There are nations in the world who are trying to turn away from formerly Russian-sourced weapons and systems. We only need to look at India, Vietnam, and some others to recognize that. Eventually, we’re going to paralyze ourselves,” he told the Senate Armed Services Committee.

Additional reporting by Chris Pocock