India Must Prepare to Face US Sanctions, Continue with Russia-Iran      
| Maj Gen S B Asthana, SM, VSM - 14 Oct 2018

India Must Prepare to Face US Sanctions, Continue with Russia-Iran      

By Major General S B Asthana, SM, VSM, Chief Instructor, USI of India

New Delhi, Oct 14, 2018: President Trump with ‘America First’ approach seems determined to reduce US trade deficit with China. With furious John Bolton, the US national security adviser keen to adjust the Chinese behaviour in trade and strategic arena, both sides do not seem to be interested in any high level engagement, especially after unpleasant experience of US Secretary of State Mike Pompeo’s brief talks at  Beijing on 08 October 2018. The tempo has increased after the warship of the two countries, posturing in South China Sea came dangerously close to each other near Chinese-occupied Gaven Reef. US allies Britain and Australia also sailed through to make the point to keep international sea lanes open in the South China Sea. The US Vice President Pence’s accusation about China’s efforts to interfere in U.S. elections is another tipping point for US expansion of Trade War. The ongoing trade war seems to have intensified, as both sides have hardened their stand to compete for global dominance through strategic and military posturing, trade and information offensive. The speculations are that earlier proposed Trump-Xi Summit may not go through in such an environment.

China protecting its Vulnerabilities

The US has targeted China is putting a brave front despite being badly hit at some of its most vulnerable spots in such an intense trade war with both sides spiralling the slapping of tariffs on a wide range of each others’ trade items. Taiwan, which is another sensitivity of China is witnessing visit of US officials after Taiwan Travel Act was signed by President Trump, with a promise to arm it further with latest weaponry. US continued military posturing in South China Sea with its allies joining in, ignoring Chinese repeated warning is another concern. A recent infusion of over $110 billion by China into its banks and poor financial recovery out of BRI partners incapable to repay anything is tightening its financial freedom for global dominance. Some of its BRI partners want to get out of the 'Debt Trap' by refusing/reducing Chinese investments is adversely affecting Chinese dream project (BRI), after five years of its announcement like Philippines.Chinese economy, which is its most sensitive spot.

Not an easy road for US

US may not be too happy with China refusing to give up either in trade war or South China Sea. Chinese continued military posturing in South China Sea with its infrastructure on artificial features in place seem to be a major concern generating a feeling of helplessness, due to relative inaction few years back. On North Korean front, the policy of good optics continues with Kim managing to get a lot of goodies from South Korea (presumably at their cost), during the last summit of North and South Korea. Kim in fact has been an outright winner, managing to get another Summit with President Trump, which helps him in convincing his countrymen of his sound leadership, as well as boosting his status internationally. US sanctions on paper continue, but after the chest thumping at Singapore Summit, his friends like China automatically relaxed the sanctions on North Korea, without any worthwhile denuclearisation/reduction in his nuclear/missile arsenal. US realises that knocking out China financially is the key to its global dominance; hence is unlikely to soften up to China. US also faces another challenge of keeping its allies like Japan and South Korea satisfied while negotiating with North Korea and asking ASEAN to make choices of partners, besides continuing with CAATSA hurting some of its strategic partners, who could be helpful in balancing China.

It will take some time to see that whoever has greater resilience to withstand the economic stand-off and appetite to take setbacks will have an upper edge, which seems to be US at this point of time. As per IMF assessment on 12 October 2018,the  GDP could decline as much as 1.6 per cent in China and close to 1 per cent in the US, if the two countries further escalate the trade war and continue with retaliatory tariffs.

How is India affected?

The IMF has also estimated that other economies in Asia, would also see their economies slowing substantially, but it is true for countries which are heavily dependent on Chinese economy/supply chain. The Indian economy has survived some global slowdowns earlier and should be able to sail through the present one. The bigger problem for India arising out of US policy is the sanction under CAATSA in dealing with Russia for urgently needed military hardware like S-400 and Iran for cheaper crude oil being paid in rupee terms, for which India has adequate refineries. The US option of buying shale oil does not suit India as it does not have adequate refineries and will have to purchase finished product in dollar terms. The port of Chabahar is also crucial for India for connectivity to Afghanistan and CAR. The silver lining is that US being our strategic partner will like to have well equipped Indian Forces to balance China and Indian connectivity to Afghanistan, in case Pakistan does not serve their strategic interest. On both counts I am hopeful that US will find a way out not to hurt its strategic partner, as some of its officials had indicated that CAATSA is not to harm its allies/strategic partners. For the time being President Trump, who is vested with the authority to sign the waiver is maintaining a surprise for everyone to speculate, by making misleading statements. India, however, has given its intentions clearly of continuing to deal with Russia and Iran, and now needs to prepare for worst case scenario of being slapped with sanctions.      

 (The views expressed are personal views of the author, and do not represent views of any organisation. Major General S B Asthana can be reached as Shashi Asthana on Facebook, LinkedIn, Youtube and Google+, asthana_shashi on Twitter. website http://www.asthanawrites.org)


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