A deal gone sour

The ritzy state dinner US president Barack Obama hosted in honour of prime minister Manmohan Singh at the White House could not obscure the fact that Singh’s visit yielded little in substance. The elaborate pomp and ceremony also did little to change perceptions in India that it has lost ground in America’s Sino-centric Asia policy. During the presidency of George W Bush, many in India had whipped themselves into rapturous frenzy over what they saw as a tectonic shift in US policy toward India. All it required to shatter their bliss (and belief) was a change of government in Washington. 

The lesson: Unlike India’s personality-driven, sentiment-laced approach, US foreign policy is shaped by institutional processes that preclude abrupt U-turns or shifts. To be sure, Bush was India-friendly. But he left office without translating his thinking into concrete policy guidance to various departments to treat India as a strategic priority. In the absence of a national security directive to the powerful State Department, Pentagon and Commerce Department bureaucracies that run day-to-day aspects of India policy, the vaunted Indo-US nuclear deal has failed to deliver tangible strategic benefits, or even to promote joint defence research and development. US export controls on high technology continue to target India like before.

The developments since 2008 actually hold the most-sobering lesson for Singh, who staked his political reputation to push through the nuclear deal. He peddled the deal as a transformative initiative that would help put the Indo-US relationship on a much-higher pedestal. But more than a year after the deal came to fruition there is no sign of its transformative power. Rather, India now is concerned about its diminished role in US foreign policy. Despite a much-celebrated strategic partnership between the world’s most-populous democracies, the US values India more as a market for its goods and services than as a collaborator on pressing strategic issues. Indeed, just as it has been balancing its relationships with India and Pakistan for long, Washington now is balancing its ties with India and China.

The nuclear deal itself is turning sour. It will take a decade or so before the first imported nuclear-power reactor begins to generate electricity. The economics of generating power from imported reactors hasn’t even been discussed. Costs are likely to be so high as to saddle Indian taxpayers with a major subsidy burden. Two nuclear-power plants currently under construction in Finland and France are billions of dollars over budget and years behind schedule.

Despite a strong US push to bag major reactor contracts and New Delhi’s action in reserving two nuclear parks exclusively for American firms, no reprocessing agreement could be clinched during Singh’s visit. Key differences remain over such an agreement, which would have to pass US congressional muster. Singh went to Washington after getting his Cabinet to approve a nuclear-accident liability bill, which seeks to cap liability at a mere $537 million (Rs2,500 crore) and makes the Indian state-run operator, rather than the foreign supplier, liable for compensation payment. Parliament must seize the opportunity when this bill is tabled to examine in full the nuclear deal, which thus far has escaped legislative scrutiny in India. The bill — intended to provide cover mainly to US firms, which, unlike France’s Areva and Russia’s Atomstroyexport, are in the private sector — seeks to further burden Indian taxpayers, rather than put the onus on the sellers of multibillion-dollar reactors.

If anything, Singh’s visit was a reminder that Obama’s tilt towards China on key Asian issues and growing US reliance on and aid for Pakistan have emerged as major sticking points in the Indo-US relationship. The policy frame in which Washington is viewing India is not the larger Asian geopolitical landscape, but the southern Asian context. But even on regional matters, the US has on occasion sought to pursue approaches antithetical to India’s vital interest. Also, at a time when Sino-Indian border tensions have escalated, Washington has failed to even caution China against any attempt to forcibly change the territorial status quo.

But more than Washington, New Delhi is to be blamed. The deal-peddlers in India allowed their wishful thinking to blind them to the strategic trends that were firmly set long before Obama came to the White House. Take the China factor. Bush left office with a solid China-friendly legacy, best illustrated by the manner in which he ignored the Chinese crackdown in Tibet and showed up at the Beijing Olympics. The talk of a US-China diarchy — a G2 — ruling the world had begun before Obama was elected. It was also under Bush that the US renewed aid to Pakistan on a massive scale, while pressuring India not to take diplomatic sanctions against Islamabad after 26/11. Clearly, the deal was oversold.