Commentary Type

Case 98-1


US v. India (1998- : Nuclear Weapons Proliferation)


Chronology of Key Events

March 20, 1998

Bharatiya Janata Party (BJP)-led coalition government under Prime Minister Atal Vajpayee is sworn in. The Hindu-nationalist BJP's campaign platform includes proposal to add nuclear weapons to India's arsenal. (Wall Street Journal, 12 May 1998, A1; Washington Post, 14 May 1998, A28; US Department of State, Background Notes-India, 1998)

April 7, 1998

Pakistan successfully tests its new medium-range missile capable of reaching deep into Indian territory. According to experts, the missile is based on smuggled North Korean technology. (Financial Times, 7 April 1998, 6; New York Times, 11 April 1998, A3)

April 26, 1998

Senior US officials say Russia is helping India build a sea-based ballistic missile with a range of 200 miles, allowing it to reach deep into Pakistan. (New York Times, 27 April 1998, A1)

May 11-13, 1998

India conducts a series of five nuclear weapons tests. After the first round of tests an aide to Prime Minister Vajpayee announces that India's test "has proven capability for a weaponized nuclear program." (Washington Post, 13 May 1998, A1)

May 13, 1998

President Clinton imposes sanctions against India as required by the Glenn amendment (Section 826-a of the Nuclear Proliferation Prevention Act of 1994), which mandates sanctions against nonnuclear states that detonate nuclear devices. Sanctions include a ban on financial assistance, except for humanitarian purposes; a ban on financing from Trade and Development Agency, Overseas Private Investment Corporation, and Export-Import Bank; restrictions on US exports of high-technology products; opposition to loans from international financial institutions; and a ban on US bank loans to the government of India. Clinton administration threatens Pakistan with similar sanctions if it responds in kind. (USIS, 13 May 1998; New York Times, 12 May 1998, A10; 14 May 1998, A13)

May 13-15, 1998

UN Security Council condemns India's nuclear tests and "strongly urges India to refrain from any further tests." Japan announces the suspension of $25 million in nonhumanitarian aid to India. In protest over the second round of tests, Japan also suspends $1 billion in new loans to India and announces policy of "cautious examination" of loans by the World Bank and Asian Development Bank to India. Canada cancels about $9.8 million of nonhumanitarian aid to India. Germany calls off talks with India scheduled for the following week and puts a hold on new development aid worth $168 million. Sweden cancels $119 million and Denmark freezes $28 million in aid to India. (New York Times, 14 May 1998, A13; Japan Economic Newswire, 14 May 1998; Wall Street Journal, 14 May 1998, A14; USIS, 14 May 1998; Agence France-Presse, 16 May 1988)

May 18, 1998

At summit meeting in Birmingham, England, G-8 nations condemn India's nuclear weapons test, call on India to refrain from further tests and adhere to the Comprehensive Test Ban Treaty (CTBT). Canada and Japan express dissatisfaction with G-8's inability to agree on economic sanctions; France, Britain, and Russia state they do not believe sanctions on India would influence Pakistan. (USIS, 17 May 1998; Financial Times, 18 May 1998, 1)

May 21, 1998

India announces a moratorium on nuclear tests; expresses its willingness to adhere to some parts of the CTBT. US demands full and "unconditional" adherence to CTBT. (Washington Post, 22 May 1998, A35)

May 26, 1998

World Bank postpones consideration of almost $1 billion in loans to India. (Washington Post, 27 May 1998, A21)

May 28-June 1, 1998

Pakistan conducts what it claims to be five nuclear tests; US intelligence sources detect only two. President Clinton deplores the tests and announces the imposition of sanctions under the Glenn amendment. A few days later Pakistan conducts another test. (USIS, 28 May 1998; International Herald Tribune, 29 May 1998, 1; Christian Science Monitor, 1 June 1998, 1)

May 31, 1998

India suggests a new global convention for nuclear disarmament that would include "all nuclear states" (India, Pakistan, and perhaps Israel in addition to five established nuclear powers) and would apply equal terms for eventual elimination of nuclear arsenals. India also offers to negotiate a no-first-use treaty for nuclear weapons with Pakistan. Pakistan expresses willingness to enter talks with India but will not commit to such a treaty. (New York Times, 1 June 1998, 1; Wall Street Journal, 1 June 1998, A12)

June 1, 1998

Indian Finance Minister Vashwant Sinha announces new budget, which includes large increases in military spending and for nuclear and missile research. Budget appears to make no allowance for impact of US sanctions. Sinha also announces increased import duties, which commentators warn could isolate India from the world economy and further erode investor confidence. (New York Times, 2 June 1998, A8; Agence France-Presse, 2 June 1998; Economist, 6 June 1998, 41)

June 4, 1998

The five permanent members of the UN Security Council condemn the nuclear tests by India and Pakistan and call on them to halt further actions. (New York Times, 5 June 1998, A8)

June 11, 1998

Pakistan announces a moratorium on nuclear testing. (Washington Post, 12 June 1998, A18)

June 12, 1998

G-8 nations agree to freeze all nonhumanitarian lending to both India and Pakistan by multilateral agencies. (Financial Times, 2 February 1999, 8)

June 16, 1998

Prime Minister Vajpayee states that India has a "credible nuclear deterrent," and will not engage in a nuclear arms race. (Washington Post, 17 June 1998, A21)

June 18, 1998

Clinton administration announces that pending the issuance of regulations for implementing sanctions, including a list of "banned entities," the US Department of Commerce will approve licenses for exports of restricted goods and technologies on case-by case basis, but with a presumption of denial for items controlled for nuclear or missile proliferation reasons. Bank loans to privately owned firms and investment by US companies are allowed; details on banned public sector transactions remain undefined. (USIS, 18 June 1998; Washington Post, 19 June 1998, A29; Journal of Commerce, 19 June 1998, 3A)

June 20, 1998

Moody's Investors Service lowers India's sovereign credit rating on concerns about the ability of its "fractious" political environment to tackle economic reforms and about the impact of US sanctions. (Financial Times, 20 June 1998, 2)

June 23, 1998

Unocal announces it will invest $4 billion in Indian oil and gas programs over the next five years. (Journal of Commerce, 25 June 1998, 9A)

June 23, 1998

US Commerce Department announces that all sales of computers with speeds over 2,000 MTOPS to India and Pakistan will require a license. (Journal of Commerce, 24 June 1998, 3A)

Late June 1998

Russia signs a $2.6 billion deal with India to build two nuclear reactors. Russia claims the venture is strictly commercial, but a US State Department spokesman says the contract sends "the wrong signal at the wrong time." (Washington Post, 27 June 1998, A20)

June 30, 1998

World Bank approves $506.4 million in loans to India for poverty-focused development programs, following approval of $543.2 million for similar programs in Andhra Pradesh state a week earlier. India hails the decisions as a victory against sanctions, but the G-8 governments contend the loans are in line with the policy of not blocking humanitarian funds. Almost $1 billion in other planned loans to India are still being held up by the World Bank. (Financial Times, 3 July 1998, 6; World Bank Press Release, 25 June 1998)

July 15, 1998

President Clinton signs legislation that exempts export credits for farm products from the Indian and Pakistani nuclear sanctions for one year. Both houses of Congress had voted for legislation under pressure from US farmers fearing heavy losses due to sanctions. Immediate effect of legislation is to allow Pakistan to negotiate purchase of 385,000 tons of US wheat. Previously approved credit guarantees include $250 million for Pakistan and $20 million for India. (Financial Times, 15 July 1998, 5; USIS, 15 July 1998; Washington Post, 15 July 1998, A10)

August 5, 1998

State Bank of India introduces "Resurgent India Bond," which is denominated in foreign currency and is available only to Indian investors; bond is intended to appeal to patriotic expatriate Indian community. State Bank of India hopes to raise $3.5 billion in first 10 days of sales. (Far Eastern Economic Review, 13 August 1998, 53; Financial Times, 5 August 1998, 3)

September 16, 1998

Prime Minister Vajpayee hints to reporters that if India signs the CTBT, it will want nuclear energy technology from the US. (Chicago Tribune, 17 September 1998)

September 23, 1998

Pakistani Prime Minister Nawaz Sharif tells the UN General Assembly Pakistan will sign the CTBT if India will also sign it. Sharif also calls for the removal of "arbitrary restrictions and discriminatory sanctions." (Washington Post, 24 September 1998, A27, A34; Financial Times, 25 September 1998, 6)

September 24, 1998

Prime Minister Vajpayee indicates to the UN General Assembly that India is ready to sign the CTBT so that the entry into force of the treaty is not delayed beyond September 1999. (Economist, 3 October 1998, 46; Associated Press, 24 September 1998; New York Times, 25 September 1998, 1)

September 29, 1998

President Clinton cancels his scheduled November trip to India and Pakistan as a sign of disapproval of the May nuclear tests. (Washington Post, 30 September 1998, A18)

October 18, 1998

Talks between Indian and Pakistani officials in Islamabad end without any concrete agreements. India raised the possibility of advance notification of long-range missile tests, while Pakistan brought up the idea of a nonaggression pact. (Washington Post, 19 October 1998, A16)

October 20, 1998

Congress passes omnibus spending legislation that contains a provision giving the president the right to waive sanctions against India and Pakistan for up to one year, except for the prohibition on arms sales. (USIS, 19 October 1998; Financial Times, 21 October 1998, 6)

November 7, 1998

Clinton administration waives sanctions against India and Pakistan barring the US Export-Import Bank, the Overseas Private Investment Corporation, and the Trade and Development Agency from operating in India and Pakistan. International Military Education and Training (IMET) programs also resume for both nations. The US will not oppose multilateral funding to Pakistan from the International Monetary Fund, World Bank, or Asian Development Bank, but will continue to oppose nonhumanitarian multilateral development aid to India. Arms sales to both countries are still banned, as are exports of certain dual-use technologies to certain end-users. (Financial Times, 9 November 1998, 6; Washington Post, 7 November 1998, A14; Financial Express (India), 9 November 1998)

November 13, 1998

US Commerce Department unveils a list of 46 Indian companies and 40 Pakistani companies involved in nuclear and missile programs. The presumption is that export licenses will be denied for these entities. India threatens to challenge the sanctions in the World Trade Organization. (Journal of Commerce, 17 November 1998, 1A, 3A; USIS, 16 November 1998; Journal of Commerce, 18 November 1998, 3A)

December 8, 1998

Indian Defense Minister George Fernandes says the seven rounds of talks with the US "have not taken us one step nearer to a fresh understanding." Fernandes also claims India is close to finishing development of a missile with a range of more than 2,000 kilometers. (Financial Times, 9 December 1998, 10; Financial Times, 10 December 1998, 4)

December 21, 1998

India and Russia sign a 20-year military technical cooperation pact and a host of other agreements. Indian officials state that Russia will continue to support India's civilian nuclear program. (Financial Times, 22 December 1998, 6)

January 21, 1999

India assures Britain it will not conduct any further nuclear tests and will sign the CTBT later this year. Clinton administration welcomes the decision. (Financial Times, 21 January 1999, 4)

February 2, 1999

After three days of talks in Delhi, US Deputy Secretary of State Strobe Talbott and Indian Foreign Minister Jaswant Singh announce the possibility of an agreement by which India would sign the CTBT in return for removal of US and G-8 sanctions on multilateral development lending. (Financial Times, 2 February 1999, 8; New York Times, 2 February 1999, A9)

February 21, 1999

After meeting in Lahore, Pakistan, the prime ministers of India and Pakistan agree to transparency measures regarding nuclear weapons and ballistic missiles. The two rivals will provide each other information on numbers of nuclear warheads and their deployment. They will also share information on numbers of ballistic missiles and will warn each other in advance of ballistic missile tests. (Washington Post, 22 February 1999, A9)

April 11, 1999

India tests the Agni II, a ballistic missile with a range of 2,000 kilometers that can carry a nuclear warhead. The government gave advance warning to Pakistan and the world's "major powers." A US official says the test will not affect US sanctions. (Financial Times, 12 April 1999, 18; 13 April 1999, 6)

April 14, 1999

Pakistan tests its Ghauri-II missile, which has a range of up to 2,300 kilometers and can carry a nuclear warhead. Indian Foreign Minister Jaswant Singh assures the world that India and Pakistan's actions do not constitute the beginning of an arms race. (Financial Times, 15 April 1999, 10; Wall Street Journal, 15 April 1999, A14)

April 15, 1999

Pakistan tests the Shabeen-1 missile, which has a range of 600 kilometers and can carry a nuclear warhead. India declares the test will not hinder bilateral talks. (Financial Times, 16 April 1999, 4)

April 17, 1999

After narrowly losing a confidence vote in parliament, the Hindu-nationalist-led government collapses, Prime Minister Vajpayee resigns. New general elections are scheduled to be held in late September. The elections coincide with the deadline for the adoption of the CTBT. Under the terms of the treaty it can not enter into force until India and Pakistan along with 42 other states sign and ratify the treaty by 24 September 1999, three years after it was open for ratification [see Legal Notes]. With the collapse of the government it is unlikely that India will sign the CTBT before general elections are held. (New York Times, 27 April 1999, A14; 9 May 1999, A4)

October 12, 1999 Hindu nationalist Atal Vajpayee, whose 24-party coalition won the majority of seats in parliamentary elections, is sworn in as prime minister for the third time in three years. New government will consider draft report by the National Security Advisory Board outlining India's nuclear doctrine released in August. The US criticizes India's decision to develop a nuclear deterrent as "unwise" and risking an escalation of nuclear arms race in the region. (Washington Post, October 8, 1999, A1; Financial Times, October 12, 1999; August 18, 1999,4; CRS 2002b, 4, 11
October 14, 1999 Republican-dominated US Senate votes 51 to 48 against ratifying the Comprehensive Test Ban Treaty (CTBT) after majority leader Trent Lott (R-MS) schedules a surprise vote. Clinton administration warns that unless Senate ratifies the treaty, countries such as Russia, China, Pakistan, and India will renew nuclear testing. (Washington Post, October 14, 1999, A1; 15 October 1999, A1, A16)
October 14, 1999 Senate approves Department of Defense Appropriations bill including a provision that gives the president authority to permanently waive all the economic sanctions imposed against India and Pakistan in response to the nuclear tests, including for the first time, sanctions relating to military assistance and exports of high technology items. (Inside US Trade, 15 October 1999; International Trade Reporter 13 October 1999; CRS 2002a, 3)
October 27, 1999 President Clinton waives restrictions on EXIM, OPIC, TDA, USDA, and IMET support, as well as on restrictions on loans and credits to the Indian government by U.S. commercial banks. (Associated Press, 27 October 1999; Presidential Determination 2000-04, 27 October 1999; CRS 2002a, 3)
December 17, 1999 US Department of Commerce announces that 51 Indian government agencies and private companies are removed from the list of about 200 entities originally sanctioned in 1998. The removal is based on administration's decision to focus more tightly on those entities that are directly involved in proliferation activities. US policy of denial of dual-use items remains unchanged. (Dow Jones International, 17 December 1999; USIS, 17 December 1999)
March 20-25, 2000 Nuclear nonproliferation concerns and improvement of economic relations are major focus of President Clinton's 5-day visit to India. During visit, President Clinton announces $2 billion in financial support for US exports to India through Export-Import Bank. Clinton also lifts restrictions on several financial assistance programs including a $25 million initiative to provide assistance to strengthen Indian financial markets and regulatory agencies terminated in May 1998. US companies sign agreements on $4 billion in projects with Indian and Bangladeshi firms. (Presidential Determination 2000-18, 20 March 2000; Financial Times, 22 March 2000, 6; USIS, 24 March 2000; CRS 2002b, 2-3)
September 14, 2000 Indian Prime Minister Vajpayee addresses joint session of Congress urging closer economic and political ties between the two countries. During 4-day visit in Washington by Vajpayee, US officials announce $900 million in Export-Import Bank financing to help Indian businesses purchase US goods and services. (Washington Post, 15 September 2000, A8; CRS 2002b, 3)
April 6, 2001 India's foreign and defense minister Jaswant Singh visits Washington to meet with top foreign policy officials of new Bush administration. During his campaign President Bush pledged to remove remaining sanctions against India. (Washington Times, 5 April 2001, A17; US Department of State Press Releases, 6 April 2001; CRS 2002a, 3)
August 2001 Deputy Secretary of State Richard Armitage visits India and publicly states that US is interested in fully normalizing relations. Administration announces it will work with Congress on lifting sanctions in order to clear the way for greater military cooperation with India. (Washington Post, 12 August 2001, A1; International Trade Reporter, 6 September 2001, 1387; CRS 2002a, 4)
September 22, 2001 President Bush determines that denying export licenses and assistance to India is against the national interest and lifts all remaining 1998 sanctions. Movement comes after India offers US unconditional cooperation in the war against terrorism and the use of India's bases for military action in Afghanistan. (Washington Post, 17 September 2001, A9; CRS 2002b, 1; Presidential Determination No. 2001-28, 22 September 2001)
October 26, 2001 Japan lifts sanctions against both India and Pakistan in recognition of their support for the US-led war on terrorism. Previously Japan had conditioned resumption of its aid program suspended after the nuclear test in 1998 on signing of the CTBT and assurances regarding nuclear proliferation. (Yomiuri Shimbun, 27 October 2002; BBC Monitoring, 29 October 2002; CRS 2002b, 10)
November 9, 2001 President Bush hosts Indian Prime Minister Vajpayee at the White House. The two leaders agreed to expand US-Indian cooperation on a wide range of issues, including counter-terrorism, regional security, technology, civilian nuclear safety, and to broaden economic ties. (White House Press Release, 9 November 2001; CRS 2002b, 2)
July 18, 2005 During a Washington summit with Indian prime minister, President Bush announces he will push for “ ‘full civil nuclear energy co-operation,’ in return for India's agreement to grant oversight of areas of its nuclear programme to international agencies and to agree to help curb nuclear proliferation.” (Financial Times, 19 July 2005, 7)

Goals of Sender Country

President Bill Clinton
"The Indian government has put itself at odds with the international community over these nuclear tests. I hope India will reverse course from the dangerous path it has chosen by signing the CTBT immediately and without conditions." (USIS, 17 May 1998)

Secretary of State Madeleine Albright
"They [India and Pakistan] have only earned themselves the opprobrium of the international community and have made their people less secure, not to speak of poorer. The best reason for them not to test is that it is not in their national interest to test. I think if they have not discovered it already, they will." (USIS, 4 June 1998)

Assistant Secretary of State Karl Inderfurth
"We will be looking for both parties [India and Pakistan] to take such steps as:

• Sign and ratify CTBT without delay or condition

• Halt production of fissile material and participate constructively on FMCT [Fissile Material Cut-off Treaty] negotiations

• Accept IAEA [International Atomic Energy Agency] safeguards on all nuclear facilities

• Agree not to deploy or test missile systems

• Maintain existing restraints against sharing nuclear and missile technology or equipment with others

• Agree upon a framework to reduce bilateral tensions, including on Kashmir" (USIS, 3 June 1998)

Deputy Secretary of State Strobe Talbott
"[The sanctions imposed on India and Pakistan] were necessary for several reasons. First, it's the law. Second, sanctions create a disincentive for other states to exercise the nuclear option if they are contemplating it. And third, sanctions are part of our effort to keep faith with the much larger number of nations that have renounced nuclear weapons despite their capacity to develop them." (Morrow & Carriere 1999, 1)

National Security Advisor Samuel R. Berger, March 16, 2000
India must meet four conditions for the US to lift the remaining sanctions: adherence to the Comprehensive Test Ban Treaty, installation of strong export controls on goods and materials related to its nuclear program, cut-off the production of fissile material and restraint in its nuclear program. (USIS, 16 March 2000; Inside US Trade, 17 March 2000)

Response of Target Country

Prime Minister Atal Vajpayee
"Every decisive action has its consequences. But if the action is inherently in the national interest—and I believe our decision to conduct the tests is in [the] supreme national interest—then we have to face the consequences and overcome the challenge ... Sanctions cannot and will not hurt us. India will not be cowed down by any such threats and punitive steps." (India Today, 25 May 1998, 38)

Pramod Mahajan, adviser to the prime minister
"There is one message American businessmen naturally get: If you don't come, there are others who will. If it is not GE, it is GEC. If it is not Boeing, it is Airbus. If it is not American banks, it is European banks." (Wall Street Journal, 18 May 1998, A17)

Attitude of Other Countries

Foreign Minister Zhu Bangzao: "The Chinese government expresses grave concern about India conducting nuclear tests. India's conducting of nuclear tests runs against international trends and is detrimental to the peace and stability in South Asia." (International Herald Tribune, 13 May 1998, 1)

"China 'denounced' the Indian tests, it expressed only 'regret' over Pakistan's actions." (New York Times, 29 May 1998, A10)

Chief Cabinet Secretary Kanezo Muraoka: "Taking the situation very seriously, the government of Japan reiterated its strong demand to India that nuclear testing and development of nuclear weapons be stopped." (Asahi Evening News, 15 May 1998)

Japanese State Foreign Secretary Ichita Yamamoto: "..if and when India decided to sign the [Comprehensive Test Ban] treaty, we will be prepared to review the economic measures, including new economic cooperation projects." (BBC Worldwide Monitoring, 29 October 1999)

European Union
"The European Union condemns the series of underground tests of nuclear weapons carried out by India. It strongly calls on India to cease further testing ... The European Union notes that India has aspirations in the international community. It considers that the conduct of these tests has not advanced but hindered those ambitions." (European Union press release, 25 May 1998)

While Russian President Boris Yeltsin criticizes India's nuclear tests, he insists that the world should confine its punitive reaction to diplomatic pressure and not impose economic sanctions. (Financial Times, 13 May 1998, 7; New York Times, 14 May 1998, A13)

Legal Notes

1994 Glenn amendment, in Nuclear Proliferation Prevention Act of 1994 (Sec. 826-a): If ... the President determines that any country after April 30, 1994, ... (B) is a non-nuclear state and ... (ii) detonates a nuclear device, ... the President shall forthwith impose the following sanctions.

(A) The United States Government shall terminate assistance to that country ... except for humanitarian assistance or other agricultural commodities.
(B) The United States Government shall terminate (i) sales to that country under this act of any defense articles, defense services or design and construction services and (ii) licenses for the export to that country of any item on the United States Munitions List.
(C) The United States Government shall terminate all foreign military financing for that country under this Act.
(D) The United States Government shall deny to that country any credit, credit guarantees, or other financial assistance by any department, agency, or instrumentality of the United States Government, except ... [for] humanitarian assistance.
(E) The United States Government shall oppose ... the extension of any loan or financial or technical assistance to that country by any international financial institution.
(F) The United States Government shall prohibit any United States bank from making any loan or providing any credit to the government of that country, except for loans or credits for the purpose of purchasing food or other agricultural commodities.
(G) The authorities of section 6 of the Export Administration Act of 1979 shall be used to prohibit exports to that country of specific goods and technology (excluding food and other agricultural commodities), except that such requirements shall not apply to any transaction subject to the reporting requirements of Title V of the National Security Act of 1947.

Waiver: None. The President may, however, delay the sanction for 30 session days.

Note: The administration never wrote the generic implementing regulations after the bill passed Congress and only released specific regulations implementing parts of the Indian and Pakistani sanctions on 19 November 1998, after most sanctions had been waived.

Comprehensive Test Ban Treaty

"Under article XIV (Entry into force), the Treaty will not enter into force until it has been signed and ratified by the 44 States listed in annex 2 to the Treaty. … If the Treaty has not entered into force "three years after the date of the anniversary of its opening for signature" [24 September 1999], a conference of those States that have already ratified it may be held to decide what measures may be taken to accelerate the ratification process and to facilitate the Treaty's entry into force." (Preparatory Commission for the Comprehensive Nuclear-Test-Ban Treaty Organization,

Economic Impact

Observed Economic Statistics

"India is the third-largest borrower from the World Bank ... In the fiscal year ending June 30, the bank expects to extend about $3 billion in loans and other assistance to New Delhi."(Wall Street Journal, 12 May 1998, A6)

"The [World] Bank says India's foreign exchange reserves, which were $26.3bn at the end of March 1998, will fall to $22.6bn in the current fiscal year." (Financial Times, 10 August 1998, 4)

"Imports were 9.3 percent higher for the first seven months of the fiscal year ... leaving a trade gap of $5.8 billion, more than 116 percent up on the period a year earlier." (Financial Times, 4 December 1998, 7)

"If all official flows, and loans from international agencies and export-credit agencies are cut off, the total could be $7 billion a year. However, disbursements are always lower than approvals: last year India is reckoned to have received only some $3 billion, less than 1 percent of GDP." (Economist, 16 May 1998, 37)

"In the first independent assessment of the potential economic fall-out from India's nuclear tests, the CMIE [Center For Monitoring Indian Economy] estimates that sanctions and negative sentiment will cut net [capital] inflows to $1bn for the year, compared with flows of $7.7bn last year and $9.3bn a year earlier. The estimates embrace official and private investment flows." (Financial Times, 14 July 1998, 4)

According to the Federal Financial Institutions Examinations Council, the exposure of US bank claims on India totaled $1,730 million at the end of 1997. The exposure of US banks to public borrowers in India amounted to $262 million at the end of 1997. (Federal Financial Institutions Examinations Council,

"GDP growth has slowed, from the average 7 percent in previous years, to 5 percent in 1997-1998. ...The public sector deficit (9 percent of GDP in 1997-1998) lies at the heart of the country's macroeconomic vulnerability. ...The current account deficit, at 1.6 percent of GDP, ... is expected to widen to 2.3 percent of GDP in 1998-1999, because of a deteriorating trade deficit and possible weaknesses on remittance inflows. ... The rupee has declined by 9.6 percent against the dollar between January ... and August 1998 owing to low investor confidence and rising inflation." (South Asia Monitor, 1 November 1998)

"Sanctions weakened the capital account. Foreign institutional investors withdrew more than US$400 million from the stock markets in May and June 1998 and Moody's downgraded India's credit rating to below investment grade. Sanctions are projected to cut net inflows of official and portfolio investment to US$1 billion for this year. To offset their impact, the government launched an "India bond", and raised US$4.2 billion." (South Asia Monitor, 1 November 1998)

"Sanctions have thus far cost India about $1.2 billion in World Bank loans, bank officials say." (New York Times, 2 February 1999, A9)

India: US Assistance, 1992-1997 (millions of US dollars)

Military aid
PL-480 food aid
Other economic aid

Source: US Agency for International Development, Overseas Loans and Grants, Obligations, and Loans Authorizations, series of yearly data.

White House Report on Potential Scope of India Sanctions states that for FY1998, $91 million was appropriated for PL-480, $51.3 million in additional economic aid, and $700,000 in International Military Education and Training (IMET).

India: US Military Sales, Commercial Exports Licensed Under Arms Export Control Act (millions of dollars)

Military sales
Commercial exports


Source: Foreign Military sales, Foreign Military Construction Sales, and Military Assistance Facts, as of 30 September 1997.

India: Export-Import Bank Assistance, 1994-97 (millions of US dollars)



Source: Export-Import Bank annual reports, various issues.

Overseas Private Investment Corporation (OPIC): Investment Projects,
(millions of dollars)


Source: OPIC annual reports, 1995, 1996, 1997.

India: Multilateral loans, 1992-1996 (million of dollars)

Total multilateral


Source: World Bank, Global Development Finance, 1998.

"There was in fact a sharp decline in the capital flows to India during the months following the nuclear tests in May. For April-June 1998, the net inflow was about $4.2 billion less than in the same quarter in 1997. This amount is modest but not insignificant relative to the whole Indian economy: it is equivalent to about one percent of GDP and four percent of gross domestic investment. Initially, this shrinkage in net capital inflows brought about a decline in India's foreign exchange reserves.... ...India was able to compensate for this initial loss of capital inflows through the sale of the so-called Resurgent India Bonds to nonresident Indians. This bond issue brought in over $4 billion, and by October 1998 total reserves exceeded the April level." (Morrow 1999, 5-6)

"Indian researchers are feeling buoyed by the new budget unveiled last weekend that hands science its largest increase of the decade. A 20% hike that would benefit both civilian and defense sectors is seen as a shot in the arm for domestic efforts to overcome foreign sanctions imposed in the wake of last spring's nuclear tests. These large increments "reflect India's determination to fight…the sanctions and denial of technology," says Raghunath A. Mashelkar, director-general of the Council of Scientific and Industrial Research (CSIR). (Bagla 1999, 1429)

"The indirect impact of the sanctions on private capital flow was greater in so far as they increased the uncertainly about India's external environment. Between 1997-98 and 1998-99, FDI flows declined from $3.5 billion to $2.5 billion while portfolio flows declined from $1.8 billion to $-0.07 billion. While it is difficult to disentangle causality, the fact that flows have again increased in 1999 suggests that the uncertain domestic political environment in India in 1998, and the resulting uncertainly regarding the course of economic reforms, together with the systemic crisis in capital flows to emerging markets were more important than the sanctions in the decline in private capital inflows in India. With economic reforms faltering and capital markets already spooked, the sanctions added to the negative factors that led to a lowering of India's sovereign ratings…. [A]ny potential financial pressures from the sanctions were severely undercut by the resounding success of the Resurgent India Bonds (RIBs).. which raised $4.23 billion in just 20 days based in the support of over 74,000 expatriate Indians in over 30 countries." (Kapur 1999, 6-7)

Calculated Economic Impact (annual cost to target country)

Suspension of Ex-Im Bank and OPIC guarantees; welfare loss estimated at 10 percent of average annual flows, 1995-97.
$36 million
Suspension of US military and economic assistance; welfare loss estimated at 90 percent of average annual transfers of 1994-1997.
$35 million
Suspension or cancellation of other bilateral aid; welfare loss estimated at 90 percent of value of aid withheld.
$315 million
Suspension of nonconcessional multilateral development loans; welfare loss estimated at 20 percent of average annual disbursement, 1994-96.
$250 million
Reduction in high-technology imports; welfare loss estimated at 40 percent of value of licenses denied.
$29 million
Reduction in military sales, commercial exports licensed under Arms Export Control Act.
Restriction on bank lending to Indian government; welfare loss calculated as 5 percent of US bank exposure to public borrowers (end 1997).
$13 million
$678 million

Relative Magnitudes

Gross indicators of Indian economy  
  • Indian GNP (1996)
    Indian population (1996)
$356.5 billion
939.4 million
Annual effect of sanctions related to gross indicators
        Percentage of GNP
        Per capita
Indian trade with US as percentage of total trade
        Exports (1997)
        Imports (1997)
Ratio of US GNP (1996: $7,637.7 billion) to Indian GNP

Sources: IMF, International Financial Statistics Yearbook, 1998; Direction of Trade Statistics Quarterly, June 1998.


Melvyn Krauss, senior fellow at Hoover Institution, Stanford University
"The economic sanctions will not change India's behavior. New Delhi surely knew before it conducted the tests that the US would impose economic sanctions in retaliation: the Nuclear Proliferation Act of 1994 requires it. The fact that the Indians went ahead with it suggests the new nationalist government believes the benefits of testing their weapons exceed the likely costs of sanctions." (Wall Street Journal, 22 May 1998, A16)

Council of Foreign Relations Independent Task Force
"U.S. efforts to prevent the current situation [nuclear tests] from coming about-a policy predicated on endeavoring to develop bilateral ties with both India and Pakistan and deterring nuclear proliferation through ... the threat of comprehensive economic sanctions-may have slowed the advance of the two nuclear programs. But U.S. policy failed in the aftermath of the elections of the new Indian government." (Council on Foreign Relations, After the Tests: U.S. Policy toward India and Pakistan, Report of an Independent Task Force, 1998.)

Washington Post
"[T]he purpose of the sanctions law was deterrence, and deterrence in this case failed. Since the threat of sanctions did not dissuade India and Pakistan from testing, some officials argued, there was little point in imposing a trade ban or Iran-style cutoff that would have undermined U.S. business interests." (Washington Post, 19 June 1998, A29)

Jim Hoagland, chief foreign correspondent, Washington Post
"A crusade to punish India politically for being the messenger of a new and uncertain nuclear era that challenges the established nuclear order may be temporarily satisfying, but it is likely to be as untenable as were the initial U.S. outrage and dictates of last May." (Washington Post, 21 February 1999, B7)

Journal of Commerce
"Problems with the sanctions law emerged soon after both countries [India and Pakistan] staged a series of nuclear tests last May. It quickly became clear that the mandatory curbs were so tough that they could only serve as a deterrent. No one knew how to apply them if testing actually took place. The first thing that U.S. officials found was that they had neglected to write implementing regulations for the sanctions law. ... As a result, the sanctions were ineffective as a deterrent and ambiguous as a punishment." (Journal of Commerce, 22 February 1999, 4A)

Daniel Morrow and Michael Carriere
"The fact that the threat of the US sanctions failed to prevent the nuclear tests by India and Pakistan is certainly not sufficient reason to abandon the Glenn Amendment. Although the US threat ultimately failed in the case of India and Pakistan, it might be the case that the threat of sanctions delayed testing by many years for both nations. A sufficient rationale for executing the threat was, as Undersecretary [Deputy Secretary] of State Talbott said, to create a disincentive for other states to exercise the nuclear option if they are contemplating it."

"At present the states that seem interested in developing a nuclear capacity—in particular, North Korea, Iraq, and, to a lesser extent, Iran—are already isolated from the global economy by their own policies and existing sanctions. The presence of the Glenn Amendment is irrelevant to their incentives. However, further down the road there may be circumstances in which nations that are more fully engaged in the global economy and that have now pledged to remain non-nuclear are driven by domestic politics or regional pressures to reconsider." (Morrow 1999, 13)

"The experience of India is particularly relevant because it indicates, that, for a country that participated in global capital markets, the indirect effects of sanctions, i.e. their impact on attitudes and expectations of both domestic and foreign economic agents, can magnify the direct effects. …The overall economic cost of these indirect effects of loss of confidence by global financial agents may far outweigh any direct costs of sanctions." (Morrow 1999, 13)

Devesh Kapur
"By mid-1999, any changes in India's position were driven—like the tests themselves—from perceived national self-interest, and sanctions were of little import in the changes (or lack thereof). India had agreed in principle to sign the CTBT although had not yet done so. This change in India's position was not because of the sanctions but because the tests had removed the rationale in not signing the treaty. If anything it could be argued that the continuation of sanctions (despite the temporary waiver) made it more difficult for the government of India to move from accepting the CTBT in principle to actually signing it, since it would seen domestically as giving in to duress." (Kapur 1999, 12)

Randy J. Rydell
"Both the threat and the implementation of sanctions have advanced US nonproliferation goals in both India and Pakistan, whether they be measure in (a) the length of time it took for such tests to finally occur, (b) the costs of having to undertake such tests quickly, underground, and with elaborate measures of deception, or (c) the message US actions have sent to the world community about America's commitment to defend both global ideals and its own national security interests. The sanctions are in all likelihood key reasons explaining why neither country has proceeded with additional tests." (Rydell 1999, 11)

Karl F. Inderfurth, assistant secretary of state for South Asian affairs
"I should stress that since the time of India's nuclear tests, our two countries have made progress toward understanding each other's security considerations, but we have yet to see the concrete actions taken that could help reconcile our differences."(USIS, 25 May 1999)

Author's Summary

Overall assessment  

Policy result, scaled from 1 (failed) to 4 (success)


Sanctions contribution, scaled from 1 (negative) to 4 (significant)


Success score (policy result times sanctions contribution)scaled from 1 (outright failure) to 16 (significant success)

Political and economic variables  

Companion policies J (covert), Q (quasi-military), R (regular military)

International cooperation with sender, scaled from 1 (none) to 4 (significant)


International assistance to target A (if present)

Cooperating international organizations

Sanction period (years)


Economic health and political stability of target, scaled from 1 (distressed) to 3 (strong)


Presanction relations between sender and target, scaled from 1 (antagonistic) to 3 (cordial)


Regime type of target, scaled from 1 (authoritarian) to 3 (democratic)


Type of sanction X (export), M (import), F (financial), Z (asset freeze)


Cost to sender, scaled from 1 (net gain) to 4 (major loss)



The Glenn amendment was written with deterrence as the goal. Once that failed, however, economic sanctions were maintained to pursue goals beyond deterrence, especially India's adherence to the CTBT and associated restraints. The policy result score of 1 reflects the fact that India is unlikely to sign the CTBT before the September deadline for the treaty's entry into force, or to sign the Nuclear Non-Proliferation Treaty or the Fissile Material Cut-off Treaty without conditions, or discontinue the weaponization of missiles.


Bagla, Pallava. 1999. Big Increase Seen as Answer to Sanctions. Science 283 (5 March): 1429–30.

Congressional Research Service (CRS). 2002a. India and Pakistan: Current U.S. Economic Sanctions. RS20995. By Dianne E. Rennack. Updated 11 February.

Congressional Research Service (CRS). 2002b. India-US Relations. IB93097. By K. Alan Kronstadt. Updated 7 November.

Kapur, Devesh. 1999. The Domestic Consequences of India’s Nuclear Tests. Paper presented at conference on South Asia’s Nuclear Dilemmas, Weatherhead Center for International Affairs, Harvard University, February.

Morrow, Daniel, and Michael Carriere. 1999. Economic Impacts of the 1998 Sanctions on India and Pakistan. The Nonproliferation Review 6, no. 4 (Fall): 1–16.

Rydell, Randy J. 1999. Giving Nonproliferation Norms Teeth: Sanctions and the NPPA. The Nonproliferation Review 6, no. 2 (Winter): 1–19.

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