India and Pakistan: U.S. Economic Sanctions

Publication Date: February 2003

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Government

Type:

Coverage: Pakistan India

Abstract:

In 1998, India and Pakistan each conducted tests of nuclear explosive devices, drawing world condemnation. The United States and a number of India's and Pakistan's major trading partners imposed economic sanctions in response. Most U.S. economic sanctions were lifted or eased within a few months of their imposition, however, and Congress gave the President the authority to remove all remaining restrictions in 1999.

The sanctions were lifted incrementally. President Bush issued a final determination on September 22, 2001, to remove the remaining restrictions, finding that denying export licenses and assistance was not in the national security interests of the United States.

Today, four Indian and 20 Pakistani entities (and their subsidiaries) remain on the Commerce Department's list of entities for which export licenses are required. By comparison, restricted entities numbered in the hundreds in the wake of the 1998 nuclear tests. An export license is still required to ship missile technology-controlled or nuclear proliferation-controlled items to users in either country, but the Department of Commerce no longer views such license applications with a presumption of denying their issuance.

Apart from the sanctions imposed following the nuclear tests, the United States prohibited foreign aid to Pakistan when that country fell into arrears in servicing its debt to the United States in late 1998, a prohibition reenforced when Pakistan's military forces overthrew the democratic government in late 1999. Post-September 11 cooperation between the United States and Pakistan included a rescheduling of the debt and new legislation to waive the so-called democracy sanctions. Pakistan thus became eligible to receive U.S. foreign assistance through FY2003 when, unless it holds free and fair elections, restrictions on foreign aid could be reimposed.