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May 14, 1998


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The FAQ of US sanctions

Under US laws, President Bill Clinton had little choice but to impose sanctions after India conducted nuclear tests. The 1994 Nuclear Proliferation Prevention Act, which had not been invoked before, stipulates the president can only delay sanctions for 30 days, but not waive them. Only Congress can actually lift sanctions.

Some questions and answers about his action:

What do the sanctions require?

A cut-off of US financial aid to India other than humanitarian and food aid, an end to the export of certain defence and high technology material, a stoppage of military aid, a halt to US credit and credit guarantees other than for the purchase of food. American will also automatically oppose international financial institutions' loans to India. < P>How much US money is involved?

The US is providing $ 142.3 million in aid to India this year, including $ 91 million for humanitarian and food aid. Most of the remaining $ 51.3 million in development aid would be cut off.

An assistance programme to help India develop its stock market and sell municipal bonds would be halted. Four billion dollars awaiting approval for projects from the US Export-Import Bank will be blocked, as will be $ 10.2 billion in insurance and financing for American firms from the Overseas Private Investment Corporation. Another $ 20 million for agriculture export credits will also be halted.

Could private US investment in India be affected?

Possibly, depending on a project's use of international and US loans. Boeing is delivering 737s to Jet Airways, for example, but is relying on a $ 200 million Exim bank credit for the deal. US bank loans to the government worth $ 1.9 billion will also be halted.

The United States is India's largest trading partner and largest investor. State department figures indicate imports from India totalled $ 7.3 billion in 1997 while US exports to India reached $ 7.7 billion, led by aircraft and parts, machinery, fertilisers, scrap metal and computer hardware. Direct US investment in India is around $ 7 billion a year.

What about international loans to India?

India, which has an external debt of $ 90 billion, is the World Bank's largest borrower with $ 44 billion in loans to date. The World Bank had plans to double lending to India to $ 3 billion this year, but that's now in jeopardy. The United States and Japan are sure to object to new loans, including two set for a vote this month: $ 500 million for three energy projects and $ 275 million for road improvements.

In all, the state department said some $ 3.8 billion worth of loan approvals pending in international institutions could be affected.

The US government will not vote for any International Monetary Fund assistance to India -- New Delhi has not relied on the IMF though.

When could US sanctions end?

There is no time period written into the law. A joint resolution approved by both houses of Congress would be needed to lift sanctions. Clinton suggested the penalties should remain until India calls a halt to nuclear testing, signs the Comprehensive Test Ban Treaty with no conditions and returns to a policy of nonproliferation.

What the US will sanction against

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