U.S. Sanctions Against India; Arms Export Control Act; Impact on Exports
By James M. Zimmerman of Morrison & Foerster LLP
This morning, May 13, 1998, the U.S. imposed harsh economic sanctions upon the Government of India as a result of its detonation of nuclear devices this week. The purpose of this memo is to provide the firm's clients and colleagues with information concerning the legal and business-related issues pertaining to the sanctions order.
Contrary to some press reports, and as more specifically addressed below, the sanctions are effective immediately. Most trade sanctions orders are imposed with warning, which allows companies to assess the impact and plan accordingly. Here, there has been no warning and no time to prepare. Although the President had the statutory authority to delay sanctions for a period of 30 days, he chose to impose sanctions immediately to send a clear message to the Indian government.
Based upon the information received to date, the immediate impact concerns the following:
Pending applications with the ExImBank for export projects to India are suspended, which includes approximately $500 million in pending loans or loan guarantees and approximately $3.5 billion in projects at the pre-application stage. Applications that have been approved and in place will not be affected by the sanctions. Construction companies, power generation equipment suppliers, electric utility plant builders, and other firms with infrastructure projects in India will be affected in some manner.
Pending applications for insurance with the Overseas Private Investment Corporation (OPIC) are suspended. This includes approximately $10.2 billion in insurance by OPIC.
Financial institutions are prohibited from lending any money to the Government of India. Currently, this is estimated to be approximately $1.9 billion.
Suspension of all direct aid to India in the sum of approximately $142.3 million a year, excluding $91 million for humanitarian and food aid. The balance of the $51.3 million is for a variety of development aid which will be suspended.
Weapon sales to India, including technology that can be used to design and construct weapons, are prohibited.
This is anticipated to be small since most of India's weapons come from Russia. However, the prohibition on weapons sales is unclear and may also include computer technology with broad application.
Projects that are seeking World Bank financing may be affected if the U.S. can obtain the support of other member-shareholders. The World Bank is set to vote on two loans this month including $500 million for three energy projects and $275 million for road improvements. The World Bank loan package for 1997 was $1.5 billion and in 1998 is estimated by press reports to be $3 billion.
Prohibits exports of "specific goods and technology" subject to export licensing. It is unclear which particular products will be subject to the sanctions until the Commerce Department takes action under the President's order.
Imports from India are not directly affected unless the producer is unable to obtain parts as a result of the sanctions.
We are monitoring the situation and suggest that those firms that are potentially affected to take a wait-and-see approach over the next 48 hours given that it is too premature to take any action at this time. Given that the law has never been applied before, there is much uncertainty as to the impact of the sanctions and exposure for U.S. firms.
http://library.findlaw.com/1998/May/13/127144.html#Scene_1
bull could u please tell us all what sanctions were put on india regarding any thing including military hardware.from Russia.
stop comparing your self to pakistan when its convenient.but at the same time enjoy all the benefits.
Thats the whole point buddy,India hasnt decided so if India decided be rest assuredwe would have given it a proper thought.
Well with the Economy doing good, we will only have more money to spend.
I think blain2 answered it pretty good.