US sanction terms still confusing

WASHINGTON, June 19: Among the few things that are clear from the so-called details of the US sanctions announced on Thursday is that Americ...

WASHINGTON, June 19: Among the few things that are clear from the so-called details of the US sanctions announced on Thursday is that American banks can continue to do business with Indian private entities, including banks, and that the annual US aid of about 145 million will remain largely unaffected.

But despite all the brouhaha about detailing the consequences of the sanctions, the fine print in many areas is yet to be written. For instance, US banks are prohibited from lending to the Indian government and government entities, but what constitutes government? Do nationalised banks, in which the Indian government has a stake, come under the definition of a government entity? And what happens if the Indian government dilutes the stake?In almost all the public sector banks baring few which have raised fresh equity from the public the Government of India controls 100 per cent shares.

In the case of banks like the State Bank of India SBI which have listed their share on major stock exchanges, governmentcontinues to be the major shareholder and some of the foreign institutional investors from the United States are also having considerable equity stake in a few PSU banks. Foreign investors including the US also hold the GDRs issued by PSU banks.The definitional issues will be clarified in executive orders to be issued shortly. The executive order will clarify, in a legal way, what constitutes loans and credits, the definition of a government quot;8230;but I can8217;t discuss details of that because it8217;s not resolved,quot; Undersecretary of Treasury David Lipton said at a briefing on Thursday.

But top US officials clearly indicated that the administration would strive to let American firms continue doing business as usual as long as it did not relate to high-tech dual use areas in which case they would come under intense scrutiny.

quot;As a general proposition, we do not want to do avoidable or undue harm to American commercial and business interests while pursuing our overall policy here,quot; Deputy Secretary StrobeTalbott said.

What is also clear is that most of the US foreign aid to India will sail through because it is considered humanitarian aid and the sanctions regulations spelt out curtails only quot;non-basic needsquot;. Indian officials say aid under population, health and food programs alone constitute about 126 million of the 145 million annual US aid.

For defining quot;basic human needsquot; the US will look back on a 1990 precedent involving China which was similarly denied loans. US officials said loans in categories such as education, maternal and child health, water and sewerage, low-income housing and rural development will go forward.

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The 145 million New Delhi gets from the US is a pittance compared to its annual aid to much smaller countries like Israel or Egypt they get 20 times as much, in the region of 2 billion to 3 billion, but the Indian line on US aid has always been quot;never complain, never reject what8217;s coming.

However, Clinton administration officials made it clear that they wouldcontinue to oppose loans to India and Pakistan from multilateral institutions like the World Bank and Asian Development Bank, although a case can be made that these too constitute humanitarian assistance considering most of the loans go into the social sector. But US officials indicated that even in multilateral institutions, they may end up opposing only what they called quot;nonbasic human needsquot; and even this opposition will only be aimed at postponement with a suggestion that the loans could go through at a later date with the resolution of the whole proliferation spat.