Sanctions Waiver Eases Way for US-India Talks

By Matthew Pennington 13 June 2012

WASHINGTON DC—The United States is holding high-level talks on Wednesday aimed at boosting relations with India, a critical partner for US interests in Asia. But even as one obstacle to closer relations has been lifted, others stand in the way.

The threat of US sanctions against India for its large yet declining oil imports from Iran was lifted two days before Secretary of State Hillary Clinton’s meeting with Indian Foreign Minister S.M. Krishna, for an annual strategic dialogue in Washington.

But differences remain, particularly over India’s reluctance to undertake economic reforms. Despite the fast growth in trade between the two countries, barriers to investment still frustrate US companies.

President Barack Obama visited India in late 2010 and declared that the US-India relationship would be a defining partnership of the 21st century. Both nations are concerned about managing China’s rise and security cooperation and defense sales have grown rapidly.

Washington looks to New Delhi as a partner in the economic development of Afghanistan and wants India to play a more active role in training Afghan security forces as the US and its NATO allies plan to withdraw combat forces by 2014.

Defense Secretary Leon Panetta visited India earlier this month, and Treasury Secretary Timothy Geithner will become the fifth Cabinet-level US official to do so this year when he travels there at the end of June.

“Our ties have never been stronger,” Clinton said Tuesday. “We are working together like never before to build an open, free, transparent and fair economic system, to promote peace and prosperity in South Asia and the Asia-Pacific, to coordinate international responses to violent extremism and so much more.”

This week’s dialogue attests to the breadth of US-India cooperation, including on education, energy and climate change, science and technology, and health.

Growth in the partnership contrasts with deteriorating US relations with India’s neighbor and rival Pakistan, which eyes the deepening ties with suspicion.

But India also has struggled to deliver on the kinds of economic reforms that Washington wants, changes that would provide more opportunities for US businesses. In November, Prime Minister Manmohan Singh’s government backtracked on plans to allow foreign investment by such companies as Wal-Mart in its supermarket—or “multibrand”—retail sector after it ran into domestic opposition.

Tim Roemer, who served as US ambassador to India between 2009-2011, wrote in an opinion piece in The Washington Post last week that despite rising trade in goods and services—predicted to reach US $100 billion this year, up fivefold from a decade ago—“too many US firms still find obstacles to doing business in India.”

He complained that a 2008 civilian nuclear agreement has been altered so radically by India’s parliament that US businesses may be frozen out of the market. The agreement, introduced by President George W. Bush’s administration, allowed India access to technology from international suppliers it had been denied since it conducted its first nuclear test explosion in 1974. Roemer also wrote that US businesses are discouraged from competing for lucrative infrastructure projects.

Karl Inderfurth, a South Asia expert at the Center for Strategic and International Studies think tank in Washington, said the US-India talks could boost investor confidence if the two governments make a concrete commitment to completing a bilateral investment treaty.

As well as economic ties, Inderfurth expected the US and India to discuss a raft of international issues, including support of democratic reforms in Burma, officially known as Myanmar, and the future of Afghanistan. He said India will be looking for reassurance that the US will retain a substantial presence in Afghanistan beyond 2014 because of concerns for that country’s stability as Western forces withdraw after a decade of fighting the Taliban and al-Qaida.