The U.S.-India Strategic Partnership and the Sanctions Conundrum

In recent years, the U.S.-India strategic partnership has truly found its footing. With strong support from President Obama and President Trump, Congress cemented India’s status as a “Major Defense Partner” in the National Defense Authorization Act of 2016 and again in 2017. Defense sales of American goods to India have grown with the convergence of our interests – nearly $16 billion in twelve years. And this week, the U.S. Defense Department renamed the U.S. Pacific Command the “Indo-Pacific Command,” a recognition of the importance of Indian defense partnership to maintaining global stability and security.

Yet this burgeoning partnership is in danger of being derailed if Congress does not address the potential threat of sanctions against India under the Countering America’s Adversaries Through Sanctions Act (CAATSA). The authors of this legislation targeted Russia, but the unintended effect of sanctioning India will be to strengthen Russia’s hand in the Asian sub-continent while damaging America’s security and economic interests.

Secretaries Mattis and Pompeo have underscored their concern and urged Congress to provide a waiver or exemption. The U.S. Chamber’s U.S.-India Business Council supports that position. The greatest impediment to expanding American defense and aerospace exports to India is Indian concern about the reliability of supply – a concern born of the historical experience of U.S. sanctions. CAATSA’s threat of sanctions exacerbates these doubts and in effect damages the competitiveness of American exporters competing with foreign firms in the Indian market. American defense exports to India could grow to over $20 billion in the coming years, but the sanctions threat puts this positive trend in jeopardy.

But the biggest potential damage is not on the commercial relationship but the strategic partnership itself. The United States has declared India to be a major defense partner and has staked out a vision for greater cooperation between our two militaries in the Indo-Pacific. One cannot on the one hand invest tremendous political, economic, and intelligence capital on deepening the strategic partnership while at the same time hold the threat of sanctions against that same partner on areas where we differ.

India’s continuing defense relationship with Moscow is a legitimate area of concern for the United States. Nearly 60% of India’s legacy systems are Russian.

Nevertheless, India has been working to move away from Russia. The United States has leapt ahead of Russia as India’s biggest supplier of new weaponry over the last three years. In this period of time, Russian defense deals were valued at less than one third the size of those secured by American companies. India has also reportedly terminated cooperation with Russia on 5th generation fighters. If the U.S. abandons the Indian defense market, Russia will be the chief beneficiary.

In lieu of sanctions, the U.S. government should offer to work with the Indian government on ballistic missile defense as was agreed to as part of the 2004 Next Steps in Strategic Partnership. India desperately needs an anti-aircraft system at a time when its air force squadrons are heavily depleted, but the United States has not provided India an alternative offer to Russia’s S-400. By offering to partner with India on ballistic missile defense and supporting offers of alternative anti-aircraft systems to go along with our offers of cutting-edge fighter aircraft, we can help accelerate India’s turn away from Russian technology and towards the United States.

In the view of the U.S.-India Business Council, we must work to eliminate the threat of U.S. sanctions against India. Ending the threat of sanctions against India would advance U.S. foreign policy objectives, strengthen the U.S.-India strategic partnership, and safeguard tens of thousands of good American jobs in the defense and aerospace industries.