First, the nuclear tests by India was a great setback to the US in not only the CIA being clueless about the explosions, but also in being unable to stall Indian efforts against the CTBT and NPT from progressing beyond objections and non-compliance to signing accords at the international fora. The Pokharan II experiments were a direct challenge to the US hegemony.

Second, the Chagai nuclear tests came as a clear defiance of US pressure on Islamabad to ensure restraint against testing in reaction to Indian actions. The Nawaz Sharif government preferred bowing to domestic pressure than be vulnerable to the promised sops in case of restraint or dangling of the sanctions threat in case ofdefiance.

Washington had exerted tremendous pressure on Pakistan to exercise restraint. US president Bill Clinton made desperate pleas to Nawaz Sharif not to react to the Indian tests, but his diplomatic moves took a severe beating with Pakistan conducting more than one test.

Experts referred to it as a bitter defeat. It is a reality check, a lesson in the limits of power and the limits of US influence around the world, as well as US ability to influence global decisions since the end of the cold war." A former US official said that when Sharif "summarily rejected the advice, it struck a blow at the heart of the Clinton administration's foreign policy. The White House spokesperson, Mike McCurry, accepted that observation when he said: "The US, despite all its wealth and its might, cannot control every event, every place in the world..."Pakistan's tests undermined the US administration's clout.

The third, which has a hidden message to both Pakistan and India, event unfolded in Iran--a "rogue" state--inthe last week of May when the Clinton administration agreed to waive the imposition of sanctions against French, Russian and Malaysian companies which are to invest $2 billion in Iran's oil sector and thus contravene the Iran/Libya Sanctions Act passed by the Congress. The Iranians believe that the US failure to follow through on this issue demonstrates the non-viability of US hegemony in the region. Legally, the investment plan by the three companies contravenes the Iran/Libya Sanctions Act which calls for the imposition of sanctions against firms which invest more than $20 million in Iran's oil sector. The sanctions were meant to punish Iran and Libya for their alleged sponsorship of terrorism.

The Iranians have consistently maintained that the sanctions policy would hurt US business more than it would hurt Iran. Herein lies answers to sanctions related to India and Pakistan as well. The US interests in the Chinese market is what has ensured the former to ignore several aberrations by the latter in thearena of human rights and proliferation of nuclear material, to name a few. The fact is that the changing global order is not merely contingent upon the political clout that a country commands, but also the economic influence that it can impose. Simply put, today economics determines politics more than ever before.

Given the size of Indian market, one of the largest buyer's market in the world, the US cannot afford to ignore the stakes involved for its domestic industry and impose sanctions of the nature it would have wished to. The sanctions will also hurt US companies because they will be unable to get Exim Bank cover for their exports to India. The Indians market is also far too attractive for US companies like Enron and Cogentrix, which have survived despite severe political storm, to slow down or quit in more trying circumstances. All this has led the Indian government to the optimistic view that the sanctions will have a watered down effect.

However, the US took lead in calling for "token" sanctionsin order to keep its perceived hegemony intact. The US share of aid to India is just about $150 million every year. Though aid to India from different countries and agencies amounts to about $1 billion annually, India actually pays out more in repayment and servicing of earlier loans. If the sanctions were to be total, as was the case with Iraq and Cuba, the international donor countries and agencies would be at the receiving end. Moreover, if India were to be pushed into a tight corner economically, a political decision could be taken to stall the repayment process as well. That is the last thing that the US would given that the market forces have already greatly undermined its political hegemony in a uni-polar world.