The Obama administration’s decision to exempt India from sanctions for its oil imports from Iran and the signing of a memorandum of understanding that paves the way for a US firm to construct nuclear power plants in Gujarat helped lift the mood at the third US-India strategic dialogue in Washington.

US and Indian officials made it a point this week to dispel a growing sentiment that the US-India relationship has been “oversold” and “run adrift.” These two developments served as a fillip to their argument.

External Affairs Minister SM Krishna said the memorandum of understanding signed between Westinghouse Electric Co. and the Nuclear Power Company of India Ltd. on Tuesday “assumes special importance because of certain reservations which had crept in after we passed the Nuclear Liability Bill in Parliament.”

“There was a lurking fear among business houses about their own involvement,” Krishna told reporters at a press conference at his hotel in Washington on Wednesday evening. “This Westinghouse memorandum of understanding opens up new vistas of opportunities for business in the United States,” he added.

Meanwhile, India continued its quest for access to David Coleman Headley and Tahawwur Rana linked to the November 2008 terrorist attacks in Mumbai. Both Coleman and Rana are in a Chicago prison. Krishna raised the issue with Secretary of State Hillary Rodham Clinton when they co-chaired the strategic dialogue at the State Department.

“We are actually looking for access right now. This is an ongoing process,” said Foreign Secretary Rajan Mathai.

Headley pleaded guilty in March 2010 to all 12 counts against him, including aiding and abetting the murders of the six Americans who died in the Mumbai attacks. He testified that he attended Lashkar-e-Toiba training camps in Pakistan five times between 2002 and 2005. In late 2005, he received instructions from LeT members to travel to India to conduct surveillance, which he did five times leading up to the Mumbai attacks three years later.

Rana, a Chicago-based Pakistani native, was acquitted by a US jury of conspiracy to provide material support to the terrorists who attacked Mumbai. He was found guilty of helping plan an attack on the Copenhagen offices of Jyllands-Posten newspaper and convicted on one count of providing material support to the LeT.

Responding to a question on India’s request for access to Headley and Rana, Hillary said: “With respect to information sharing, it is our policy and practice to share information, and we do that.” She declined to get into details of this information sharing, but said: “It’s also important that we support the work that is done by our professionals and our experts in protecting both of our countries, and I think we are satisfied that is occurring.”

At his meeting in Washington, Krishna also raised the importance of eliminating terrorist safe havens in Pakistan and briefed the US side on recent breakthroughs in the India- Pakistan relationship.

He said the US was aware that India, particularly Prime Minister Manmohan Singh, has been “going out of his way in order to extend his hand of friendship with Pakistan, and of late there has been some responses which are very encouraging from the Pakistan side.”

Krishna, who is due to visit Pakistan in July, said Pakistan had proposed a date that conflicts with “very important” prior commitments in India. New Delhi has sent a message to Islamabad to rework the dates.

On Afghanistan, there is a distinct change of heart in Washington about India’s role in the Central Asian nation. The George W. Bush administration had issued a demarche in 2002 instructing India to reduce its footprint in Afghanistan to avoid upsetting Pakistan. Now, as the US-Pakistan relationship has grown strained and a 2014 deadline looms to withdraw US combat forces from Afghanistan, the Obama administration wants India to play a bigger role.

The US wants India to train Afghan security forces. Krishna said India was already doing so, but, he added, “India’s position is that this has to be Afghan-led and Afghan-owned. We are willing to assist them.”

The Indian delegation briefed their American interlocutors on the work India is already doing in Afghanistan. “I am very pleased that Afghanistan is getting this kind of encouragement and tangible support because it’s in everyone’s interests that Afghanistan be as secure and stable as possible,” said Hillary.

A major irritant in the US-India relationship was set aside earlier this week when Hillary granted an exemption to India from sanctions noting that it had “significantly reduced” its volume of crude oil purchases from Iran. This exemption will be reviewed after 180 days.

“The United States appreciates that India has made it clear it understands the importance of denying Iran a nuclear weapon and supports the efforts to ensure Iran’s compliance with international obligations,” Hillary said on Wednesday.

As India seeks to wean itself off Iranian oil, Krishna said it was looking at other countries, including Saudi Arabia, to fulfill its energy needs. “India takes a decision taking its domestic requirements into consideration,” he added.

Krishna declined to comment on US Defence Secretary Leon Panetta’s description of India as a “linchpin” in the US’ new defence strategy in Asia-Pacific region. While the US and India share concerns about China’s growing presence in Indian Ocean, New Delhi has been reluctant to embrace a US strategy that may fuel suspicion in Beijing about an attempt to contain China. Hillary has sought to allay these concerns by proposing a trilateral dialogue between the US, India and China.