CAATSA LAW

What is CAATSA

The US Congress passed Countering America’s Adversaries through Sanctions Act (CAATSA) in 2017. It was signed by current US President Donald Trump on 02 August 2017 with an aim to counter the aggressions by Russia, Iran and North Korea. The US President has delegated his powers through CAATSA to ban 39 Russian entities, dealings with which could make third parties liable to sanctions. Its major objective is to discourage exports of Russian defence equipment.

The law is designed to punish Russian President Vladimir Putin for the

  •       2014 annexation of Crimea from Ukraine

  •       Involvement in the Syrian civil war

  •       Meddling in the 2016 U.S. presidential election

What sanctions will be imposed?

  •       prohibition on loans to the sanctioned person.

  •       prohibition of Export-Import bank assistance for exports to sanctioned persons.

  •       prohibition on procurement by the United States Government to procure goods or services from the sanctioned person.

  •       denial of visas to persons closely associated with the sanctioned person.

None of these is of any material consequence. There are only two sanctions that may impact either India-Russia relations or India-US relations.

The first of these, which is likely to have an impact on  relations, is the “Prohibition of Banking transactions” [Sec. 235(a)(8) of CAATSA]. Under this, the Secretary of the Treasury would prohibit the opening, and prohibit or impose strict conditions on maintaining, in the United States, correspondent accounts or payable-through accounts of Financial Institutions engaged in transfer of funds from the sanctioned person to the Russian defence sector. This would mean difficulties for India in making payments in US Dollars to Rosoboronexport for the purchase of the S-400 systems.

The second sanction will have far greater consequences, not for India-Russia relations, but for India-US relations. And that is the “Export sanction” [Sec. 235(a)(2)], which has the potential to completely derail the India-US Strategic and Defence partnership, as it will deny the license for, and export of, any items controlled by the US to the sanctioned person under

  •       the Export Administration Act (EAA) (all dual-use high technology goods and technology);

  •       the Arms Export Control Act (AECA) (all defence related items);

  •       the Atomic Energy Act (AEA) (all nuclear related items); and

  •       all other items from the US requiring prior review and approval of the United States Government.

US President Biden urged not to impose CAATSA sanctions on India

The reasons behind it

“First, India has taken significant steps to reduce its imports of Russian military hardware in recent years. From 2016 to 2020, there was a 53 per cent drop in Russian arms exports to India compared to the preceding five-year period.

These are positive trends that show India’s effort to reduce reliance on Russian equipment, and a desire to take advantage of its new status as a Strategic Trade Authorization-1 (STA-1) partner,

“Second, there is a national security imperative to waiving sanctions. Imposing sanctions at this time could derail deepening cooperation with India across all aspects of our bilateral relationship – from vaccines to defence cooperation, from energy strategy to technology sharing.

Conclusion

Actions reinforce India’s status as a Major Defense Partner and will provide another avenue to counter PRC influence in the Indo-Pacific,

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