Media Briefing: Modi Comes to Washington

 

 

Transcript of Media Briefing with Michael Kugelman and Raymond Vickery

Drew: Michael, do you want to start us off with a general scene for the trip?

Michael: This trip is really meant to highlight the rapid progress made in U.S.-India relations in recent years and to underscore the importance of maintaining the current momentum in relations against the backdrop of changing U.S. leadership. So in effect this trip is both a lovefest and a sales pitch. In terms of deliverables, I think we should expect some substantive, though not splashy, outcomes. I don’t expect any major big ticket announcements; nothing closely approximating the U.S.-India Civil Nuclear Deal concluded a number of years back. I think we can expect some announcements about things like wildlife preservation and cyber cooperation, and not big arms deals. And I think there also will be a series of accords signed on trade, business, and defense. If we want to talk about really big ticket possible announcements, they would have to pertain to one of two things, neither of which is really assured by any means. One would be an agreement involving the Westinghouse Corporation dealing with civil nuclear cooperation. If this were to come about I think it would be a way to show actual results on the Civil Nuclear Deal, which has really fallen far short of full implementation. Second possible big announcement, big outcome, could be on one of the so-called foundational agreements—these logistical deals that the U.S. tends to conclude with its biggest defense partners that allows for things like refueling on each other’s military bases. India has long refused to sign these and I think that getting India to sign on the dotted line would represent a giant leap for U.S.-India relations. I don’t know if we’re really there. Finally, I’ll just step back a bit and say that there’s a tendency to put the cart before the horse when it comes to U.S.-India relations. I think that both sides often talk big about strategic partnerships and things like that, yet the two have never really agreed on what constitutes a strategic partnership and in fact they tend to disagree on this. The U.S. tends to see strategic partnership as involving joint military operations and intel sharing. India on the other hand tends to focus more on technology transfers and arm sales, that type of thing. I think that the U.S.-India relationship could really take off a lot more than it already has if the two sides could reach consensus in what they mean by strategic partnership. So now I’ll let Ray offer some comments as well.

Ray: Hey Gardner hope you’re doing all right… This is Ray Vickery. I think that this trip comes at a time when Prime Minister Modi is trying to consolidate his gains, really, in the U.S.-India relationship. And he’s had a willing partner in President Obama in that regard and really willing partners in the leadership of Congress. This comes at a time when we’re involved in elections, and after November who knows what the scenario will be. So now is a really good time in Modi’s view as well as the President’s and as well as Speaker Ryan’s and the other leadership in Congress to try to consolidate some of the gains over the past couple of years particularly. Now, Prime Minister Modi has a vision of India as a world leader, but he knows that he can’t be a world leader unless you have a world class economy to back it up. He’s been spectacularly successful in attracting more foreign direct investment in India. India overtook both the United States and China as the number one FDI destination. And if you add in FDI which comes through Mauritius or Singapore, the United States is either number one or number two in regard to FDI.

Gardner: You mean if you take Mauritius and Singapore out, you mean.

Ray: No, No—if you add in the U.S. investment that comes through Mauritius and Singapore. For my book on this subject—U.S.-India economic engagement—I went back and looked at the projects that actually were coming through at that time from Mauritius and Singapore, and if you go down through them you will see that about two-thirds of them are from U.S., obviously U.S.-named, companies, if you will. So when you look at what the FDI is, it’s not really reflective of reality just to look at those which are denominated explicitly “U.S.” This is very important to Modi—you recall in September of 2015 he came, went to Silicon Valley about FDI, about innovation, about his making India his startup.. So this is a primary goal from the Indian side. In fact, if you look at the Ministry of External Affairs release, you’ll see that they put economic, energy, and environment ahead of strategic matters. So this is a consolidation in that regard and it comes at a time when the U.S. has very important strategic as well as economic interest. Economically, India is the fastest growing major economy in the world. [It] grew at 7.9% in the last quarter, 7.5% over the last year. We sold about 12 billion dollars’ worth of arms; we are India’s top arms supplier. There have been infrastructure deals signed with GE for about three billion in railways and in solar energy in several billion dollars area. But on the strategic side you may recall that in January of 2015 Obama and Modi worked out a vision statement which had to do really with rebalance toward Asia, the look-east policy of India—very important in regard to the South China Sea and what happens there. On the Western side, you will recall that Modi has just returned from Iran, where he signed a port agreement to give him access really to Afghanistan from the Chabahar Port. Modi is going to Afghanistan before he comes to the United States—in fact that’s the first stop on this five-nation swing, where he will inaugurate a dam project that has been developed between India and Afghanistan—then going on to Qatar and Switzerland before he comes here. So both on the economic side and the strategic side it’s an important time for the consolidation of progress which has been made over the last couple of years.

Michael: You know, we had a briefing at the Indian embassy and the ambassador was fairly straightforward in sort of saying the Indians are looking for an upgrade in the technology that they are allowed to get in the defense relationship and they want to sort of be an ally without being an ally. And one of the reporters said, ‘So let me get this straight, you want all the benefits of an alliance but you want none of the responsibility?’ And the ambassador sort of cheerfully answered, ‘Yes.’ I think one of the interesting questions that I want to answer at some point is… something that I find fascinating is that when Modi comes here there’s always talk about this great personal relationship between Modi and Obama, which looking back on it is kind of truly bizarre because both of those guys are kind of loners. It’s not like Obama has great relationships with leaders around the world. He wasn’t like George Bush, who sort of felt like he really bonded with a lot of leaders. And Modi is this guy who obviously has this reputation - I mean nobody wants to talk about the Gujarat Riots anymore—but his reputation is kind of this very majoritarian, Hindu, right-wing thing. If the Muslim’s are the blacks of India, the idea that this guy who’s sort of the equivalent of a Southern segregationist getting along great with the first black president of the United States is sort of really strange. So do you guys have any thoughts about that?

Ray: Well I have some thoughts about it. First of all, nations have interests really that have to go beyond the friendship. If you get on the friendship side of it—I don’t know if you’ve met Modi in the past, I’ve met him a couple of times—Modi is a really down-to-earth guy who tries to answer your questions. He doesn’t try to just go from his talking points and he comes from a very modest background, as you know, as a tea seller. I think to an extent both Obama and Modi have spent most of their lives as outsiders, if you will. They are both in power now and their countries have mutual interests. So I believe that that is a fount of the relationship. I would also, though, point out that Obama had very good personal relations with Modi’s predecessor, Manmohan Singh, and he got along sort of like, I don’t know, father and son protégé. You may recall at the G20 during all the crises how well they worked together. So I think that it is true that it is a bit anomalous, but they are both outsiders and they have both come to power with a common vision of being able to have a U.S.-India relationship which is worldwide in scope in terms of cooperation. Michael, I don’t know if you want to add to that?

Michael: Yeah, I mean I’ll just say that certainly we have to look at the personal aspects of the U.S.-India relationship to help understand why the relationship has taken off so significantly over the last two years. The question is to what extent the relationship will be affected by the leadership transition in the U.S. … Is the U.S.-India relationship driven by shared interests that could easily overcome new leaders in both cases, or is the personal aspect such a big part of it? And I would actually argue that the U.S.-India relationship, despite all its warts and tensions, it is a very strong relationship. I think that even though there’s going to be a new president in the next few months, I’d like to think and I’d like to assume that the U.S.-India relationship will be just fine, even when you no longer have this very sharp and striking personal chemistry between the two leaders. And I would also say, not to play the role of Devil’s advocate here, but I do think there’s genuine affection between Modi and Obama, but you also have to wonder if there’s certain strategic dimensions, particularly from Modi’s side, to conveying this sense of strong comradery and so forth. For example, as you know when Obama was in India, the last time, I believe, a lot was made of this huge bear hug that Modi gave to Obama. You could argue that, ‘Well, maybe it’s because it’s genuine affection—he was happy to see Obama and so forth.’ But at the same time that conveys a very powerful message when you have a deep embrace between the Indian Prime Minister and the leader of the world’s sole super power. It suggests a level of strength on the part of India and a level of influence, which I think is worth keeping in mind.

Ray: I  just might add to that. I wrote an article called “Modi’s Americanisms” for the Diplomat when he first came in. Modi is, in many ways, a U.S.-style politician—in terms of the bear hugs, in terms of the touching and feeling, the use of the internet and information technology. And so, for Obama, it’s easy to feel at home with Modi because he does that. The downside of Modi’s Americanisms is that he thinks India is the center of the world, not the U.S., which we tend to think of. So there is that kind of aspect to it. But I think he operates in a fashion as a politician which is pretty familiar to a guy like Obama who has been involved in the same kind of activity.

Q: And so there’s no big deliverables here. And India’s puttering along pretty well despite the fact that I think there’s real disappointment in India at this point two years into Modi’s prime ministership that he didn’t do any of the big, hoped-for reforms like GST and labor markets and land and all that sort of  never really happened.

Michael: I think there’s certainly something to be said for that, and there are several factors at play here that you really can’t blame Modi for. One is that for all this talk about Modi and his party winning a landslide victory in the election in 2014, BJP does not have a majority in the upper legislature’s house. Also there’s the fact that a lot of these reforms would require buy-in from states government’s, and as you know there are many state governments in India that are not controlled by the BJP party, so that causes a problem there. But I think also you simply had a case of outside expectations and promises that could simply not be achieved in terms of what Modi had said on the campaign trail. He essentially wanted to take what he did in Gujarat, which has long enjoyed a very inherently entrepreneurial type of environment, and take what he did in Gujarat and extend it across the entire country; in terms of bringing electrification to large amounts of people. These are very difficult things to do on a national level, of course. I would argue—and I’ve written—that in many ways Modi has been much more successful in his foreign affairs and his foreign policies than in his domestic policies, even though his campaign pitches and much of the focus as he was running for office was focusing on getting the economy back in order.

Ray: Wait a minute; he must be doing something right because it’s the fastest growing economy in the world, the number one FDI destination. I don’t think you can really blame Modi for the GST not going through; it’s sort of like Obama and Congress in the sense that his opposition controls the key house to be able to get GST through. In spite of that, there have been a lot of reforms: increase in the caps on FDI for defense, for insurance, and in other areas, the de-control of diesel pricing fuel, the steps made in moving to renewables in terms of both solar and in terms of wind. So, I don’t think that it’s really fair to say that there hasn’t been progress and there is a deep sense of disappointment or else people wouldn’t be flocking to India for the FDI that they are, or in portfolio investments. The Bombay Stock Exchange and the National Stock Exchange are both doing very well. Now, there are some really deep problems in India economically. There’s still a lot of protectionism, the tariffs are too high; they can’t even really negotiate with some of the folks that they have or are trying to get free trade agreements with. They have one big problem in regard to water. The drought, which has plagued them for the past two years, maybe relieved somewhat this year, but that’s been a huge problem. So yeah it’s been a mixed record, but there has been progress on that, and when you look as Michael says at the strategic relationship we’re really saying they have said, ‘Well we don’t expect any obligations.” But when you issue a vision statement which says to China that you expect China to resolve its differences with the Philippines, Vietnam, not by name but the countries in the region, in accordance with the UN Treaty on the Sea, that is really quite a difference from what we’ve had in the past.’

Michael: Though I would just add to that very quickly that India is still carrying out a balancing act when it comes to its relationship with China and the U.S. because clearly one of the main pillars of cooperation between the U.S. and India when it comes to strategic considerations is this shared concern about China. But at the same time, maybe Ray would disagree, but I would argue that Modi has no interest in imperiling or damaging the very complicated Indian relationship with China. Modi has gone on the record saying some very complementary things, interestingly enough, about China’s economic model. I don’t think that Modi wants to imperil a relationship with the country, and for obvious reasons—why would India want to imperil its relationship with a country like China? So there’s a bit of a delicate dance that needs to be executed by the Indians as they move forward in their relationship with India while keeping the China factor in mind.

Ray: Yeah, well, all these heads of state do that delicate balancing. I mean, if you look at Obama’s statements about China you’ll find ones that are very, very positive. But it is true that Modi, very early on, went to Arunachal Pradesh against the wishes of the Chinese and made a very strong statement about how it was part of India. And on Chinese maps that entire state is supposed to be China. He was asked to withdraw the oil exploration deals that they had with Vietnam in the South China Sea. ONGC was going to withdraw and he told them, ‘No, you guys stay there and you continue to prospect for oil in the South China Sea against the wishes of China.’ So it’s absolutely true that you have to balance, but I don’t think that’s a lot different than the balancing that we do with China.

Gardner: Alright guys, this was great. Thanks so much for talking to me.

Drew: Ray and Michael did you have anything else to add?

Michael: I’ll just say a few words about Pakistan. I imagine that whenever there’s a focus on the U.S.-India relationship, Pakistan always happens to be on the mind of looking at the broader U.S.-India relationship. I would actually argue that things are changing in this regard. To be sure, Pakistan is a very sharp thorn in the side of the U.S.-India relationship. Washington doesn’t like to resort to the hyphenation game, but India does. I think we need to be clear that the U.S.-India relationship can and will go quite far, but I think so long as Washington continues to want to work and work closely with the Pakistani army, the Indians will be uncomfortable and unhappy and that will ensure that there will be some level of unease in the U.S.-India relationship. Though, I would argue that the trajectory of the U.S. relationship with Pakistan is changing in a way that could really benefit the U.S.-India relationship. I think what we’re seeing in the last few months is a case of the U.S. losing patience with Pakistan, not being willing to tolerate its policies towards militancy and terrorism. I think this drone strike on the leader of the Afghan Taliban in Pakistan recently is an indication of that. I think the Obama administration specifically is very intent on really completing this pivot to Asia so to speak, completing this much valued rebalance to Asia, and that entails a very significant role for India. There simply is no role for Pakistan in the Asia rebalance because Pakistan is a very close ally of China, which of course plays a really big role in the U.S. motivations for wanting to rebalance and how India could help the U.S. in terms of cooperating with the U.S. to push back, though subtly, against China’s increasing presence and activities in the broader Asia region. To highlight what Ray was saying about the strategic relationship, I think that there are so many genuine conversion interests when it comes to strategic affairs and foreign affairs between the U.S. and India. To the East, there’s shared concern about China and a desire to improve ties with the Asia Pacific countries. To the West of India, as well, there’s shared concern about terrorism, Pakistan, destabilization in Afghanistan, and so on. So I think that the strategic sands are shifting, so to speak, in terms of how the U.S. thinks about Pakistan, how it really wants to intensify its engagement with the Asia Pacific. This can all work to the advantage of the U.S.-India relationship.

Ray: Just picking up on that, I think that one of the things which will take place in the discussions between Modi and Obama is really the trade-off, if you will, for more activity by India, looking and acting eastward into the South China Sea in return for appreciation of India’s position for greater involvement in Afghanistan and in the corridor which begins with the Chabahar Port in Iran and runs up through Afghanistan and to the Central Asian Republics. This all will involve Pakistan in the sense that India will be involved on both sides of Pakistan. I think there’s this trade-off which is going on here. I do think in terms of consolidation that what’s going on on the Hill in trying to submit what Ash Carter has been doing—he’s taken four trips over there—that the defense relationship, both in terms of arms sales and in terms of making India, in terms of tech transfer, will be consolidated and will go forward in part as a result of this trip.

Drew: I don’t want to neglect Congress because [Modi] will be giving an address to Congress as well. There were some sharp remarks last week in a Congressional hearing about India and human rights. Senator Cardin also made some remarks in New Delhi critical of India’s human rights record. Ray, do you think he will be received well in Congress?

Ray: I think it will. I don’t think that the invitation would have been issued without a broad base of support, particularly on the House side, and I believe there is an understanding that India plays this important strategic role. Now it’s not all peaches and cream, and India has warts the same as the United States does, particularly in regard to human rights. I think, though, that overall it will be a positive reception.

Michael: Just to add to that, I imagine that the speech will be very well-received across the board along bipartisan lines for sure. Modi is not going to get up there and try to stir the pot and try to highlight the tensions in the relationship. He’ll want this to be a very uplifting, positive, though in my view not overly flowery, appraisal of the good spot that the U.S.-India relationship occupies right now. I don’t really know if he will try to respond to some of these comments made by certain members of Congress over the last few years about human rights and treatment of religious minorities and so forth in India. I imagine that he would want to keep things positive and would not want to ruin the mood, which I imagine will be very warm and happy and so forth. Just getting to these comments that some of these congressmen have made—this has understandably made quite a splash in the Indian media. Though, I think it’s important to keep things in perspective. It wasn’t too long ago when U.S. views of and perception of India were extremely negative. During much of the Cold War era and really leading up to the early 90s you had a lot of Americans, including those in officialdom, that really stereotyped India in a pretty vicious way and didn’t really see it very positively. So a lot of the baggage from the past will die hard so to speak, so you may get the types of comments that you got on Capitol Hill in the last few days. That said, as Ray said, India is a complicated place and it has a lot of challenges and a lot of problems that I think it’s important to bring attention to. A truly strong, deep partnership between two countries would allow the space for either side to provide critiques of the other in a way that would be received by the other side and that wouldn’t really damage relations or anything like that, and I think it won’t. The mood won’t change. It will still be a very optimistic mood, a very warm mood, when Modi arrives, and I imagine that anything that was said by these folks on Capitol Hill won’t really change that.

Speakers

  • Michael Kugelman

    Deputy Director and Senior Associate for South Asia
  • Raymond E. Vickery

    Global Fellow
    Senior Advisor, Albright Stonebridge Group; Of Counsel at Hogan Lovells LLP; former Assistant Secretary of Commerce, Trade Development