Jan. 9 (Bloomberg) -- U.S. Energy Secretary Ernest Moniz has canceled his scheduled trip to India this month in the latest fallout from the arrest last month of an Indian diplomat in New York.
Moniz’s trip is being postponed amid the diplomatic tensions, according to two officials with knowledge of the decision who asked not to be identified. In addition, Nisha Desai Biswal, the U.S. assistant secretary of state responsible for India, last week delayed her plans to travel to the country.
The U.S. moves came as India acted to curb activities at a social club linked to the U.S. Embassy in New Delhi, part of its campaign to pressure American officials into dropping visa fraud charges against the diplomat, who is scheduled to appear in court Jan. 13. Devyani Khobragade, charged with visa fraud for underpaying her Indian babysitter, has been in “ongoing” plea talks, Preet Bharara, the U.S. attorney in Manhattan, told a federal magistrate in New York this week.
The arrest, which triggered Indian outrage when it was disclosed that Khobragade had been strip-searched by U.S. Marshals, has put a cloud over the Obama administration’s goal of strengthening U.S.-India ties. The incident sparked an uproar in India as the nation of 1.2 billion people prepares for elections in a few months.
Bilateral trade in goods grew to $59.1 billion last year through November, up 57 percent from $37.6 billion for all of 2009, the first year of the Obama administration, according to data from the U.S. Census Bureau. The U.S. is the fifth-largest source of foreign direct investment into India, according to the Indian Embassy.
Raymond Vickery, who was a top U.S. trade official during the Clinton administration, said that expanding trade and investment has been “the underlying driver” in growing U.S.- India ties.
“Can they be affected if this thing continues to spiral out of control?” said Vickery, who is now senior director at the Albright Stonebridge Group in Washington. “Yes, they can be.”
While business between the two nations hasn’t been hurt “at this point,” both sides need to realize that “economic engagement is fundamental and we have to work out matters that have to do with diplomats and how they are treated in the United States,” he said today in an interview.
The delay in Moniz’s visit is unfortunate, said Vickery, who is heading to India this week to speak at a conference on importing U.S. liquefied natural gas.
The U.S. will look for a “mutually convenient time” to resume energy talks, State Department spokeswoman Jen Psaki told reporters yesterday.
“We continue to believe that we can maintain our strong historic relationship, and that’s what our focus is on,” Psaki said in Washington.
U.S. prosecutor Bharara said Khobragade submitted a false visa application for an employee who was to work as her housekeeper and babysitter, and paid her “far below” minimum wage. He has said the strip-search of Khobragade was standard practice.
The social club with a swimming pool and bowling alley will be shut to non-diplomats from Jan. 16, while embassy cars will now face traffic fines, according to an Indian government official, who asked not to be identified because he isn’t authorized to discuss the matter publicly.
“There is no merit in extending courtesies beyond what is accorded to our diplomats,” Foreign Minister Salman Khurshid told reporters in New Delhi yesterday. “Since they are saying they will abide by their law, so we will also apply our laws. We are withdrawing facilities that were extended over and above what was mutually agreed between us.”
Located next to the U.S. embassy in New Delhi’s diplomatic district, the American Community Support Association is popular with families and used for embassy functions, including last year’s July 4 Independence Day celebrations. It has a baseball field, a small gym, a beauty parlor, and restaurants and bars serving cheeseburgers and American beer.
The club, which had offered family memberships for $2,425 a year, will soon be available solely for accredited diplomats because they are exempt from paying duties on services, according to the Indian government official. The club may now struggle to stay open because it will serve a small number of diplomats, the official said.
India also asked the American Center, a venue in central New Delhi for U.S. cultural programs including movies, concerts and plays, to cease all programs immediately for failing to gain approval, according to the official. This month the center was due to screen films such as “White House Down” and “Wolverine,” and host an event called “How to Fund Your U.S. Education.”
After years of exemptions, U.S. embassy cars will also face penalties for unauthorized parking, running red lights and dangerous driving, the official said. Fines for such violations range from 90 rupees ($1.45) to 990 rupees for first-time offenders, according to the Delhi Transport Department.
The moves build on measures announced earlier to remove security barriers around the U.S. embassy in New Delhi and cancel diplomatic import privileges for food and alcohol. Indian authorities also sought information on how much Indian staff earn as employees of the U.S. government, and if teachers at the American school paid taxes.
Further action may be taken against the embassy in coming weeks, the Indian official said, declining to say what measures are being considered. U.S. Embassy spokesman Peter Vrooman didn’t answer calls to his mobile phone.
“This has become rather silly and unfortunate,” said Salman Haider, India’s former top bureaucrat in the foreign ministry who had also served as ambassador to China. “It’s important that the two sides talk this issue out and find a way forward. I have seen no evidence that the U.S. or India has taken any steps in that direction.”
U.S. Secretary of State John Kerry sought to mend ties with India over the incident, expressing his regret in a Dec. 18 call to Indian National Security Adviser Shivshankar Menon. He stopped short of an apology.
At stake is the growing relationship between India and the U.S., which took time to thaw in the 1990s after decades in which India was viewed as a Soviet ally. Indian Prime Minister Manmohan Singh, who was President Barack Obama’s first official diplomatic guest, last week described a deal with the U.S. that allowed it to import nuclear technology as his greatest achievement during a decade in power.
“Our government attaches highest priority to strengthening this strategic partnership between our two countries,” Singh told reporters in New Delhi on Jan. 3. “There have been recently some hiccups, but I sincerely believe that these are temporary aberrations and diplomacy should be given a chance to resolve these issues.”
Khurshid said last month he told the U.S. to abandon the case against Khobragade. The diplomat this week asked a judge to postpone a Jan. 13 deadline for her indictment to Feb. 12.
Since her arrest, Khobragade has been transferred to a position at India’s United Nations mission in New York from her consular role to give her full diplomatic immunity. The U.S. State Department has said that new posting wouldn’t nullify any previously existing criminal charges.
In a contract prosecutors said Khobragade submitted as part of the visa application, the diplomat said she paid the babysitter $9.75 an hour -- above minimum wage as required by law, State Department Special Agent Mark Smith said in the criminal complaint. In a second contract, the diplomat agreed to pay the babysitter 30,000 rupees a month, or approximately $573, the U.S. said, which came out to about $3.31 per hour.
Khobragade denies wrongdoing, and her lawyer said last month she was arrested in error.
To contact the editor responsible for this story: Daniel Ten Kate at email@example.com