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How Can U.S.-India Relations Survive the S-400 Deal?

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9/3/2018 How Can U.S.-India Relations Survive the S-400 Deal? - Carnegie Endowment for International Peace

How Can U.S.-India Relations

Survive the S-400 Deal?
Ashley J. Tellis
Article August 29, 2018

Summary: India’s impending purchase of the Russian S-400 missile system may be the thorniest problem
currently bedeviling the U.S.-India strategic partnership. But with a little creativity, it can be overcome.

Despite the convulsions that have marked U.S. foreign policy during Donald Trump’s presidency, U.S.-India
relations appear to have survived relatively unscathed thus far. However, the tenor of bilateral interactions
has certainly changed somewhat: Washington’s strategic altruism toward New Delhi has not disappeared, but
it has been punctuated by new expectations of reciprocity, especially in the economic arena. Even in this
area, though, the Trump administration’s demands have been modest overall and in many ways overdue.

The administration’s ability to preserve the transformed U.S.-India relationship it inherited from its
predecessors can largely be attributed to the constellation of officials who dominated U.S. decisionmaking
early on: former national security adviser H. R. McMaster, former secretary of state Rex Tillerson, and current
Secretary of Defense James Mattis, who continues to invest in strengthening ties with New Delhi. Together,
they shaped the administration’s National Security Strategy and National Defense Strategy documents, which
effectively gave India prominent standing; recast the U.S. approach toward the Indo-Pacific to formalize
India’s integration into the Asian balance of power; and reoriented Washington’s policy toward South Asia,
pressing hard against Pakistan’s continuing support of terrorism. These changes also undergird the
liberalization of India’s access to advanced U.S. technologies, exemplified by authorization of the release of
the Sea Guardian unmanned aerial vehicle and the bestowal of Strategic Trade Authorization, Tier 1 status to
India.

These advances aside, however, a specter haunts the bilateral relationship—namely, the threat of U.S.
sanctions on India if its purchase of Russia’s S-400 strategic surface-to-air missile (SAM) system is
successfully concluded. This problem is admittedly not of India’s making, but it nevertheless must deal with it.
The challenge for New Delhi is not simply to ward off U.S. penalties but, equally important, to preserve its
burgeoning ties to Washington without alienating its other international partners—thus protecting its freedom
to pursue the independent foreign policy it so prizes. Pulling off such triangulation is being put to a new and
difficult test by the U.S. Congress’s enactment of the Countering America’s Adversaries Through Sanctions
Act (CAATSA), which, despite having misgivings, Trump signed into law in August 2017.

The CAATSA legislation grew out of deepening dismay with Russia’s egregious international behavior—from
its annexation of the Crimean peninsula to its interference in the 2016 U.S. presidential election. It codifies
the sanctions that former president Barack Obama imposed on Russia in 2014 for Crimea and requires the
executive branch to impose a number of further punitive measures. Consequently, the president’s autonomy
in sanctions policy, in particular the reversal of previously imposed sanctions and the application of new ones,
is severely restricted.

Although CAATSA contains different penalties for myriad infractions, Sections 231 and 235 of the law place
India in an unavoidable crossfire. Section 231 requires that the president impose sanctions on any entity that
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“engages in a significant transaction with . . . the defense or intelligence sectors of the Government of the
Russian Federation,” and Section 235 describes the sanctions that may be imposed, which include, but are
not limited to, prohibiting “any transactions in foreign exchange that are subject to the jurisdiction of the
United States and in which the sanctioned person has any interest” and forbidding “any transfers of credit or
payments between financial institutions or by, through, or to any financial institution, to the extent that such
transfers or payments are subject to the jurisdiction of the United States and involve any interest of the
sanctioned person.”

These two sections of the law now endanger India’s long-standing defense relationship with Russia for many
defense goods, including its latest effort to procure the S-400 SAM. India has been negotiating its purchase
for many years, going back to the Obama administration. At that time, however, these discussions received
little attention in Washington, because India was well known to be an important customer of Russian military
equipment. Moreover, the Indian acquisition of the S-400 did not threaten any particular U.S. equities then
and, if anything, spared Washington the difficulty of having to offer New Delhi any alternative at a time when
the United States was reluctant to introduce strategic defense systems into South Asia.

Unfortunately for New Delhi, all this changed with the advent of the Trump administration. CAATSA’s passage
into law effectively threatened India’s quest for the S-400, stirring up a new and potent controversy in U.S.
interactions with India. Ironically, the disagreement surfaced at about the same time that the Trump
administration was articulating various national security policies that treated India as the centerpiece of both
its South Asian and larger Indo-Pacific strategies.

On the surface, there is no easy way out of this conundrum. India aims to negotiate the purchase of at least
five complete Russian S-400 systems with a price tag of close to $6 billion—almost the textbook definition of
“a significant transaction” envisaged in CAATSA. The Trump administration, consequently, could not pretend
to ignore this deal, even if it wanted to. And Congress would never permit it to do so, because the legislative
branch has its own smoldering grievances with the administration thanks to Trump’s peculiar enthusiasm for
Russian President Vladimir Putin.

Concertedly targeting India by attempting to obstruct the S-400 deal, however, threatens to undermine the
administration’s larger objective of working with New Delhi in the broader Indo-Pacific space—a strategic goal
that is of particular importance to the U.S. Department of Defense and one that even Congress’s most
resolute opponents of Russian misbehavior can sympathize with. Not surprisingly then, Mattis took the lead in
urging Congress to exempt a small set of U.S. partners—in particular, India, Indonesia, and Vietnam—from
the sanctions obligations associated with CAATSA. Congress responded in Section 1294 of the John S.
McCain National Defense Authorization Act for Fiscal Year 2019 (NDAA) by permitting the president to
exercise the waiver authority established in CAATSA if he can certify that the waiver is fundamentally in U.S.
national security interests, that the countries offered relief are taking demonstrable steps to reduce their
defense dependence on Russia, and that they are cooperating with the United States in advancing critical
strategic interests. These are indeed highly constraining conditions, but the passage of this amending
legislation at least opens the door for the potential waiver of some CAATSA-relevant sanctions on a handful
of countries that are important to the United States.

This congressional action, however, has been misread in India. For example, on July 25, 2018, a Times of
India report declared that “India is all set to get a waiver from the punitive US law called Countering America’s
Adversaries Through Sanctions Act (CAATSA), which will allow New Delhi to ink the [Rupees] 39,000 crore
deal for five advanced S-400 Triumf air defence missile systems from Russia later this year without facing the
threat of financial sanctions from Washington.” On July 27, 2018, an editorial in the Indian Express echoed this
widespread but mistaken view, when it reassuringly exclaimed that the “clouds casting a shadow of doubt
over bilateral ties seem to be moving away now, as the US Congress has passed a law which grants
exception to India when it procures the S-400 missile system from Moscow.”

In actuality, the NDAA did no such thing. Underscoring Congress’s prerogatives on sanctions policy, the law
only grants the president the authority to waive sanctions on some major Indian purchases of Russian
equipment, such as the S-400, on strict conditions. But, therein lies the rub: although Trump has been
granted the authority to exempt any given transaction between India and Russia from CAATSA sanctions—
assuming that the other conditionalities in the law can be satisfied—there is not yet any evidence that he will
do so.

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This is largely because despite the perceptions of Trump’s fondness for Putin, he is opposed to the
proliferation of S-400 systems globally. The S-400 represents a conspicuous danger to U.S. military
operations at a time when U.S. forces are threatened by formidable anti-access and area-denial “bubbles”
around the world—a peril that the Trump administration resolutely seeks to defeat in the manner laid out in its
National Defense Strategy. In addition, Trump cannot understand why America’s friends would want to buy
weapons from any other country, since, as he put it, “the United States makes by far the best military
equipment in the world: the best jets, the best missiles, the best guns, the best everything.” His antipathy
toward the S-400 thus extends to acquisitions across the globe, whether by putative adversaries such as
China, treaty allies such as Turkey, or emerging partners such as India. Given this aversion, all three
countries are solid targets for strong U.S. sanctions as and when their procurement of this system is
completed.

That there are divisions within the U.S. government does not increase India’s chances of escaping this
unpleasant dénouement. Of the constituencies involved in decisionmaking on this matter, only the
Department of Defense has argued on the record for a waiver relating to India’s impending purchase of the S-
400. As former Indian foreign secretary Kanwal Sibal has perceptively noted, “State Department
functionaries, on the other hand, have said that the Administration is fully committed to CAATSA and that it is
working with partner countries, including India, to help them identify and avoid engaging in potentially
sanctionable activity under CAATSA.” Finally, the inclinations of senior National Security Council staff are still
unknown. Even if they harbor views different from the president’s on the S-400, they are unlikely to change
his preferences on this matter. Unless Trump alters course for other reasons, the confluence of these realities
makes a collision between the United States and India inevitable—and it is likely to be deeply disruptive to
the strategic cooperation that is slowly emerging when the Indo-Pacific region itself is in unsettling flux.

India’s predicament in these circumstances is not enviable. New Delhi has a long history with Moscow, going
back to the high tide of the Cold War. India became dependent on the Soviet Union only after its requests for
advanced military equipment had been turned down by the West. And its reliance on Russia for technical
assistance with its strategic weapons programs will likely persist for some time to come. Today, India is
struggling to maintain a semblance of productive relations with Russia at a time when Putin has tilted toward
India’s most consequential adversary, China; Russia has reinserted itself into Afghanistan and Pakistan in
ways that are unhelpful to Indian interests; and the warmth has all but evaporated from the ties that still link
Moscow to New Delhi.

Amid these unfavorable developments, the promise of continuing arms trade remains one of the few levers of
influence that India still possesses vis-à-vis Moscow. Because India has cancelled its high-profile involvement
in the co-development of Russia’s fifth-generation fighter and has accelerated the diversification of its arms
acquisitions away from Russia during the last twenty years, consummating the S-400 deal will enable India to
minimize the irritations in relations with Russia. Therefore, not surprisingly, New Delhi views the threat of U.S.
sanctions on its impending S-400 purchase both as fundamentally unfair and as a real constraint on its ability
to maintain diverse international partnerships of its choice. Responding with defiance, India’s minister of
defense, Nirmala Sitharaman, declaimed, “CAATSA is not a UN act, it’s a US act . . . we have spoken on the
S-400 for years, not just today.”

Such swagger notwithstanding, the fact remains that the S-400 poses a serious risk to the evolving U.S.-India
strategic relationship—one that both nations must seek to resolve, even if it is admittedly an imposition on
India. Simply lamenting the unfairness of India’s circumstances will not make the problem disappear, nor will
any grandstanding on New Delhi’s part. So the challenge of resolving the S-400 predicament remains, but
there are three possibilities that notionally offer a way out:

Option 1: Scuttle the S-400 purchase in favor of other alternatives. The Trump administration advocates
this course of action for many reasons, and it merits India’s consideration on a couple of counts. For starters,
Moscow promised New Delhi that it would not transfer advanced conventional weapons to China that were on
par with, or superior to, those sold to India; but with the sale of the S-400 SAM and the Su-35S fighter to
China, Moscow has violated both assurances, respectively.

As a result, the Indian Air Force’s (IAF) offensive and defensive counterair missions will now confront even
greater problems if China decides to deploy the S-400 and other similar mobile systems (and their inevitable
“indigenously designed” derivatives) within its Western and Southern Theater Commands, where the IAF may
be expected to operate in times of conflict. To defeat these threats, the IAF will have to make more expensive
investments in electronic warfare, long-range precision-strike missilery, and, above all, stealth strike fighters

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to protect the freedom of action that would likely be lost if China’s S-400 or other advanced SAMs cloned
from previous Russian acquisitions, such as the HQ-9, were used against India.

Yet New Delhi’s ability to acquire stealth strike fighters from the United States—the only country that currently
produces advanced fifth-generation fighters such as the F-35—would be undermined by its possession of the
S-400 because Washington understandably fears that the F-35’s stealth characteristics, information
management systems, and electronic warfare capabilities might be compromised by any synergistic
operations that would inevitably occur if India had already integrated the S-400 into its air defense network.
These concerns arise from the apprehension that any operator deploying both the S-400 and the F-35 in
close and continuous proximity would be able to use the S-400’s high resolution radars to map the F-35’s low
observability characteristics and its electronic protection and attack capabilities in ways that could ultimately
compromise U.S. operational advantages.

The fact that the IAF is likely to protect such information in its own self-interest—and will probably never
confront U.S. military forces in conflict—cannot be of great consolation to the United States; Washington
would prefer that no foreign country have access to such vulnerability data to begin with. After all, the F-35 is
the principal next-generation combat aircraft that will be operated by the U.S. Air Force, Navy, and Marine
Corps, with close to 2,500 fighters slated to be acquired by the United States alone and hundreds more
purchased by its allies. The administration can, therefore, be forgiven if it is a trifle anxious about protecting
the puissant capabilities residing in its largest procurement program.

Expecting India to mitigate these concerns by deploying the S-400 as a stand-alone system is unrealistic: the
substantial investments that the IAF has made in recent years to create a “common operating picture” of the
airspace along India’s borders imply that the air force would inevitably seek to integrate the S-400’s
sophisticated target acquisition and engagement radars with the other sensors in its air defense network.
Because extended-range air defense remains the S-400’s primary function, its overall effectiveness will
depend greatly on how it utilizes cueing data from other distributed sensors, just as the lethality of India’s
unified air defense ground environment, in turn, will hinge on how it shares targeting information emanating
from the S-400’s sensors with other shooters operating elsewhere in Indian airspace. Therefore, if the S-
400’s launch-on-remote and other cooperative targeting capabilities are to be fully utilized—as the IAF
expects—India’s ability to assuage U.S. concerns about the potential threats to the F-35 would diminish
further.

Obviously, the exact effects of these potentially pernicious interactions cannot be gauged from the outside.
They are likely to be the subject of future discussion between U.S. and Indian officials, but the problems
implicated here are not unique to the U.S.-India relationship. Turkey—currently slated to receive F-35s—is
also threatening to acquire the S-400 system from Russia. Reviewing this issue, two respected Turkish
analysts, Sinan Ülgen and Can Kasapoğlu, have already concluded that “operating the F-35 and the S-400
together, technically, would . . . pose important risks not only to Turkey, but also to the entire current and
future operators of the aircraft.”

Whether or not India can be persuaded by such an assessment, it merits reflection. As long as the United
States is convinced that its F-35 stealth fighters are at risk because of inevitable integration with the S-400
system, Washington will be reluctant to sell the aircraft to New Delhi. And this comes at a time when India is
exploring the acquisition of a U.S. fifth-generation fighter capable of “kick-down-the-door” penetrations of
enemy airspace on day one of a war—a requirement of some urgency given that China is already developing
similar aircraft and Indian cooperation with Russia has failed to produce an acceptable competitor.

The Trump administration’s solution to the S-400 complication has, therefore, centered on urging India to
jettison the deal with Russia and buy a U.S. system instead. Toward that end, the U.S. government has
encouraged New Delhi to consider acquiring several advanced, and previously unavailable, defensive
systems such as the Patriot, complemented either by the Terminal High Altitude Area Defense (THAAD)
system or the Aegis area defense system. Unfortunately, none of these alternatives are likely to prove
appealing to India for both operational and political reasons.

Operationally, what India seeks most from the S-400 is a long-range surface-to-air capability aimed at
neutralizing air-breathing rather than ballistic threats. The IAF prefers the S-400 because its long maximum
slant range (~400 kilometers) and high maximum altitude (~98,000 feet) make it the ideal weapon to destroy
Chinese high-value platforms, such as airborne warning and aerial refueling aircraft, as well as advanced
fighters, at great distances behind the front. The United States does not currently possess any comparable
system to the S-400. This is primarily because the country has not invested in strategic SAMs since the early
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Cold War, given that the technological and operational superiority of the U.S. Air Force has permitted its
manned combat aircraft to neutralize all airborne threats at great distances either from the homeland or,
where expeditionary operations are concerned, from the front line.

U.S. surface-to-air weapons, accordingly, fall into two categories: long-range systems that are directed mainly
toward ballistic missile defense, or shorter-range systems that are reserved mainly for use against surviving
enemy aircraft that pose a threat to U.S. ground forces. Therefore, none of the systems meet Indian
requirements for extended-range air defense—and, even if jerry-rigged for that purpose, they would be more
expensive and arguably unavailable on any timeline that would be appealing to New Delhi.

Buying a U.S. system at this juncture would also not satisfy India’s political needs. New Delhi seeks to
maintain some semblance of partnership with Moscow when Russian sensitivity to Indian interests must be
protected and when continued access to Russia’s military wares and technical assistance must be assured—
with both goals to be advanced if necessary by commercial means.

Option 2: Defer payment for the S-400 until circumstances change. The upshot of the discussion thus far
implies that India is unlikely to abandon the S-400 acquisition—no matter how much the Trump administration
may prefer this course of action. But what about a less appealing but possibly more productive alternative,
such as simply slow rolling the conclusion of the S-400 deal with Russia until conditions change for the
better? This strategy offers some intriguing possibilities and, even if it does not guarantee success, is worth
considering.

It is widely believed that India and Russia aim to sign the final agreement for the S-400 purchase during the
October 2018 summit between Prime Minister Narendra Modi and Putin. If India were to pursue Option 2 as a
way of circumventing the current problems posed by CAATSA, it could sign the S-400 agreement but delay
its implementation. Indian policymakers, at least publicly, have haughtily dismissed any possibility of being
deterred by U.S. action, but, unless Trump decides to provide sanctions relief to India before the October
summit, both India and Russia could actually benefit from the respite offered by Option 2.

Whatever form Indian blustering may take, the fact remains that the United States can prevent the successful
closure of the S-400 sale by imposing financial sanctions on all the intermediaries involved in managing
India’s dollar payments to Moscow. A barter transaction is not a plausible option because India does not
export any goods to Russia that would immediately be worth $6 billion in hard currency. Because the
penalties imposed by CAATSA kick in primarily when a significant financial transaction is complete, India
could seek to defer any monetary obligations until its dialogue with the U.S. administration on securing a
CAATSA waiver finally bears fruit.

India has apparently already experienced the burdensome consequences of CAATSA sanctions: as one
Indian report noted, “financial sanctions by the US have hit India’s arms trade with Russia hard and payments
for weapons and equipment worth over $2 billion were stuck after banks refused to make remittances to
Moscow fearing penal action.” Avoiding a repeat of such problems on what will be a much bigger transaction
this time around only makes sense, even if it is neither a permanent nor an entirely satisfactory solution.

Finally, it is also unclear whether there is sufficient money in the IAF budget to pay for the S-400 in part or in
whole during the current fiscal year. All these considerations make the alternative of deferring payments for
the system even more compelling, but the success of this approach ultimately hinges on Trump or his
successor waiving the CAATSA penalties on the S-400 transaction at some point in the future.

Option 3: Make a deal with Trump. The contingency inherent in Option 2 underscores why it is necessary
for India to reach an understanding with the Trump administration so that a sanctions waiver for the S-400
deal may be realized. Although there are advocates within the U.S. government who see the value of
affording such relief for India on strategic grounds—Mattis being the most prominent—the individual to be
ultimately persuaded is Trump. Given his worldview and his prevailing convictions about the S-400, it is
unlikely that the articulation of pro-waiver arguments alone will move him substantially in that direction.

Of course, New Delhi could rightly object, as it has done already, that it should not be held to account for the
problems created by U.S. law and policy and therefore should be relieved of the obligation to find ways out of
this dilemma. However understandable that rejoinder may be, it does not resolve the problem that India
currently faces and hence will require deliberate Indian action that contributes toward a solution.

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Unfortunately, there are still enough significant irritants present in the U.S.-India relationship—in many cases
on the issues that matter most to Trump—that a costless waiver for India will prove hard to obtain. India’s
bilateral trade policy disputes and its overall trade restrictiveness, its discomforting interactions with Iran and
North Korea, its unhelpful interventions on the ongoing dispute between the United Kingdom and Mauritius
over the Diego Garcia island, and other obstacles produced by its bureaucratic intransigence have only
magnified the challenge. Indian policymakers are not blind to these difficulties, even if they have thus far
failed to assuage U.S. concerns.

The final approach worth contemplating, therefore, is offering Trump a deal. It would probably require India to
move forward on one of the several major defense acquisition programs it has discussed with the United
States over the years, thus enabling New Delhi to secure the capabilities it has always wanted while giving
Trump an incentive to speedily issue the waiver that India needs. Both sides could thus come out ahead. For
such a workaround to attract Trump’s attention, however, India’s proposal must be lucrative enough to the
United States and remarkable in its potential geostrategic impact. And the details should emerge close to fully
formed from a quiet dialogue between Indian and U.S. policymakers at the highest levels. Quickly resolving
some of the more pressing trade disputes would only help this process further.

There are many reasons why India ordinarily would be resistant to such an approach, not least of which is its
aversion to anything that smacks of bargaining or transactionalism. But India does both extraordinarily well
when it needs to. Without such a solution, New Delhi will be left only with the hope that the United States,
recognizing India’s importance for the success of its long-term strategy in Asia, will come to the right
conclusion about issuing the S-400 waiver in its own self-interest. If Trump comports with such an
expectation, India’s problems will undoubtedly disappear. But India cannot simply assume, or even expect,
this outcome if the president believes that all New Delhi wants is to get more from the United States without
offering even a modicum of reciprocity in return. On this count, Trump is emphatically not George W. Bush.
Given this fact, expectations of persistent U.S. magnanimity will be a thin reed on which to hang India’s
hopes for resolving the thorniest problem that currently bedevils its strategic partnership with the United
States.

End of document

About the Tata Chair for Strategic Affairs

The Tata Chair for Strategic Affairs focuses on the pressing international security challenges of the
emerging world order, especially U.S. foreign policy and relationships in Asia and the Indian
subcontinent. The Chair was established in April 2017 in recognition of Ratan N. Tata’s leadership
on Carnegie’s Board of Trustees and his role in taking Indian industry beyond its national borders to
create a global brand, emphasizing innovation as the hallmark of commercial success, and
contributing to the building of U.S.-India ties.

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