Recent reports have highlighted that India’s planned defence procurement from Russia could potentially come under US sanctions under a newly enacted law, Countering America’s Adversaries through Sanctions Act (CAATSA).
The Act, if implemented in its extreme form, has the potential to adversely affect India’s defence purchases from its traditional partner, Russia, besides putting to test India’s growing defence and security relations with the United States.
This Brief examines CAATSA and its likely implications for India’s defence and security cooperation with two of its main arms suppliers, Russia and the United States.
CAATSA was passed overwhelmingly by the US Congress and signed reluctantly by President Donald Trump. Enacted on August 2, 2017, it aims to counter the aggression by Iran, Russia and North Korea through punitive measures. Title II of the Act primarily deals with sanctions on Russian interests such as its oil and gas industry, defence and security sector, and financial institutions, in the backdrop of its military intervention in Ukraine and its alleged meddling in the 2016 US Presidential elections.
Section 231 of the Act empowers the US President to impose at least five of the 12 listed sanctions — enumerated in Section 235 of the Act — on persons engaged in a “significant transaction” with Russian defence and intelligence sectors. Two of the most stringent of these sanctions are the export licence restriction by which the US President is authorised to suspend export licences related to munitions, dual-use and nuclear related items; and the ban on American investment in equity/debt of the sanctioned person.
Some other sanctions, which are of not much relevance to India, include restriction on US Export Import Bank assistance; prohibition on loans from international financial institutions; exclusion from participation in US government procurement; and visa restrictions on corporate officers of the sanctioned entities.
Subsequent to the enactment of the Act, the US President has delegated his powers to the Secretary of State to implement Section 231 in consultation with the Treasury Secretary. As part of Section 231 of the Act, the Department of State has notified 39 Russian entities, dealings with which could make third parties liable to sanctions.
These include almost all of the major Russian companies/entities such as Rosoboronexport, Almaz-Antey, Sukhoi Aviation, Russian Aircraft Corporation MiG, and United Shipbuilding Corporation which are active in manufacturing defence items and/or their exports.
It is important to mention that among the 39 entities, Rosoboronexport, the Russian state-controlled intermediary for export/import of arms, also figures in the list notified on April 6, 2018 by the Office of Foreign Asset Control (OFAC) of the Department of Treasury, in pursuance of various Executive Orders, besides CAATSA.
The significance of Rosoboronexport finding its name in the OFAC’s list is that, apart from all of its assets subject to US jurisdiction being frozen, any non-American person facilitating significant transactions with it will also be liable to face sanctions by the United States.
Click here for the full report (13 PDF pages) on the IDSA website.