It is important to note that the imposition of these sanctions falls far short of a complete trade embargo. The intent of the sanction is to limit US government assistance to the government of a nation involved in nuclear weapons testing, and the focus of the prohibitions is on curtailing such assistance by the US government to India. As such, mostly purely commercial transactions, including those listed below, remain unaffected:

Under the Arms Export Control Act, as amended by the Nuclear Proliferation Prevention Act of 1994, the President is required, subject to certain exceptions, to impose sanctions on any "non-nuclear weapons state" -- which includes India -- that engages in nuclear weapons testing or other prohibited nuclear activity. Since this is the instance of invoking the Act, there is no precedent to provide guidance in this situation.

The application of all the prescribed sanctions is mandatory and does not require Congressional action. The sanctions set forth in the Act require the termination of many forms of US government assistance to the offending country including, as relevant here, the following:

Ban on US Agency Extensions of Credit: The Act provides that "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 Statesgovernment," except as related to intelligence activities and humanitarian assistance.

Although neither the Act nor its legislative history defines those entities that constitute "department[s], agenc[ies] or instrumentalit[ies] of the United States government", it is clear that, at a minimum, the Export-Import Bank of the United States is covered. The Act specifically amends the federal statute under which the Exim Bank was created to provide that in the event of a violation of the Act, the board of directors of Exim Bank will not "give approval to guarantee, insure, or extend credit, or participate in the extension of credit in support of United States exports to such country".

An exception is provided if the President determines that such support by the Exim Bank is in the national interest and promptly reports this determination to Congress. In addition, the statute authorising the formation of the Overseas Private Investment Corporation (OPIC) establishment that OPIC is an "agency" of the UnitedStates. Thus, both Exim Bank and OPIC are now prohibited from providing political risk and other guarantees of extensions of credit for projects in India.

US Banks: The Act states that the term "United States government" shall prohibit any United States bank from making any loan or providing any credit to the government of that country. The term "United State bank" is not defined in either the Act or its legislative history. This term would, however, presumably include state and federally chartered banks and would seem to cover all actions by these entities, including those of their overseas branches. It could, arguably, also cover branches or agencies of foreign banks located in the United States.

The Act similarly does not define the term "the government of that country". While this term would clearly apply to the government of India as a sovereign entity (including government agencies), it might also cover wholly -- or majority -- owned entities of a national government, such as those entitiesacting in a quasi-governmental capacity and perhaps even those of a purely commercial nature.

For this purpose it may be helpful to look to the Foreign Sovereign Immunities Act, which defines "agency or instrumentality of a foreign state" as "any entity (1) which is a separate legal person, corporate or otherwise, and (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and (3) which is neither a citizen of a state of the United States, nor created under the law of any third country."

The Act clearly does not prohibit extensions of credit, whether by US or foreign banks, to individual, corporates or other legal entities in India that are not government-owned or controlled.

Two questions of significant concern to US banks involve the effect of the sanctions on credit agreements with Indian governmental entities existing prior to the date of effectiveness of thesanctions. These are:

(1) May US banks make future disbursements to Indian government entities under or existing binding commitments to lend;

(2) can US banks maintain existing loans with Indian governmental entities, or are such banks required to terminate these loans? The office of foreign assets control (OFAC) is the agency that will be responsible for issuing guidance on these and other pertinent questions.

Limitations on Exports: The Act requires the US government to terminate "sales to that country of any defense articles, defense services, or construction services, and licenses for the export to that country of any item on the United States Munitions List". The Act also grants the president the authority to invoke the full powers of the Trading with the Enemy Act (TWEA) to prohibit exports to that country of specific goods and technology.

While TWEA's powers enable the President to impose a comprehensive trade embargo against India, the President has acted much narrowly, limiting onlythose exports requiring (according to the While House statement) export controls from the commerce department. Technically, this could embrace all exports that are subject to "general" licenses. We presume that the prohibition applies only to those exports to India, such as exports of computers and other high-technology equipment, that requires specific pre-export licensing from the US department of commerce.

International financial institutions: The final relevant sanction is the requirement that "the United States government oppose the extension of any loan or financial or technical assistance to that country by an international financial institution." The term international financial institution presumably includes the World Bank and its agencies -- International Finance Corporation and Multilateral Investment Guarantee Agency. Therefore, the United States would be required under the Act (at a minimum) to exercise its voting power within such institutions against any proposed assistance to Indiaby any of the World Bank group members.

The Act raises many questions regarding its application, due to the absence of defined terms and the dearth of legislative history, compounded by the fact that it has not yet been applied. Moreover, the Act leaves unanswered basic question such as how long sanctions, once implemented, should remain in effect and how, it at all, they may be terminated. Additionally, the Act does not address the effect of its prohibitions on existing contractual arrangement that could not be consummated in light of these prohibitions.

While the Act is the only statute that specifically deals with nuclear weapons testing and mandates the imposition of specific sanctions under the prescribed circumstances, it should be noted that other federal statutes exist under which the president would have the power to prevent US companies from engaging in further activity with India. These statutes, including the International Emergency Economic Powers Act and TWEA, provide the president withbroad power to circumscribe economic activity with foreign nations, as, for example, in the embargoes imposed against Cuba and North Korea, and, more recently, Iraq, Libya and Burma.

Given their separate purposes and the stigma associated with the imposition of sanctions under these statutes coupled, of course, with the significant political and economic US interest in India today, it seems less likely that the broader authority of these statutes would be invoked.

In summary, the immediate consequences as relevant to most US financial and commercial enterprises are that: