Exploiting loopholes

In August last year, Trump singed the Countering America’s Adversaries Through Sanctions Act (CAATSA). As per this act, any country trading with Russia’s defence and intelligence sectors faces secondary sanctions. It was designed to punish Russia for the 2014 annexation of Crimea from Ukraine, involvement in the Syrian war, and alleged meddling in the 2016 US elections.

This impacted India since our neighbour uses a large amount of Russian military equipment, from submarines and ships to combat planes. This act put a crimp in India’s defence spending, though it has, in recent years, increased arms purchases from the United States and Israel.

Recent reports suggest a path has been opened for India by the US to avoid sanctions while still being able to buy arms from Russia. The US Congress reached an agreement last week under which Trump can seek a waiver for allies. The condition is that the administration has to certify that a country is reducing arms imports from Russia while expanding defence cooperation with the United States. This allows India to complete the negotiations on a $6 billion deal to buy air missile systems from Russia that had been in limbo.

This is not the first instance of India being able to circumvent US sanctions for national interests. Throughout the last bout of US sanctions on Iran under Obama, India has been able to continue to import oil through a pseudo barter system that skirted around the dollar and used Indian Rupee, Iranian Rials and Euros.

While it seems unlikely that India will be able to continue to find loopholes to trade with Iran, historically it has been able to find leeway despite sanctions. Pakistan however, though has not been able to substantially benefit from being a neighbour to an oil-rich country that also has a significant market for Basmati rice.

In his recent speech, Imran Khan emphasized that going forward Pakistan would like to have cordial relations with Iran. He also stated that the one-sided relationship with the United States needs to give way to more balanced ties.
As a US ally, India has been able to continue with its deals based on national interests. Pakistan, also a recognized ally of US, has often had to toe the line. Keeping the looming IMF question and the FATF grey list aside, maybe going forward ‘Naya Pakistan’ will be able to follow a less submissive and more assertive, yet tactful, foreign policy.