India takes a hit over Russian
fighters By Sudha Ramachandran
BANGALORE - India's relations with Russia
have hit an air pocket, with the Russians seeking
to renegotiate the terms of a US$8.5 billion deal
to supply India with Sukhoi fighter aircraft. The
new pricing terms that the Russians are proposing
would require India to fork out another
half-billion dollars.
Under the deal to
supply the multi-role combat aircraft to India,
Russia's Irkutsk Corp has already supplied 60
Su-30s. Russia is willing to deliver another 40
fighters at the cost escalation of
2.55%
per annum as agreed under the original deal.
However, for the remaining 138 Su-30s to be
assembled by the Bangalore-based Hindustan
Aeronautics Ltd, Russia wants the cost-escalation
rate to be hiked to a minimum of 5%.
India
and Russia both need the deal, so a compromise is
likely, such as settling for a cost-escalation
rate of about 4%, above the current 2.55% but
below the 5% now being demanded. Or India could
pay in euros. But a bitter taste will remain.
Russia is also considering increasing the
cost of the 44,570-tonne aircraft carrier Admiral
Gorshkov (renamed by India as INS Vikramaditya)
that it was to make available to India by August
2008. The proposed price rises were conveyed to a
delegation of top Indian officials that was in
Moscow last week.
This has injected a
perceptible chill into India-Russia ties. Except
for a few years following the collapse of the
Soviet Union in 1990, when relations cooled,
India's relationship with Moscow has been close.
For decades, India has viewed Moscow as a reliable
friend that backed its development priorities and
provided its defense forces with most of its
hardware. While trade and economic cooperation
were important parts of the bilateral
relationship, it was the military component that
constituted the backbone of the friendship.
The friendship has survived despite
India's warming relations with the United States
in recent years. It is Russia that remains India's
top military partner, notching up annual sales
worth $1.5 billion, and it is with the Russians
that Delhi's cooperation has more depth.
The multibillion-dollar Sukhoi program is
said to be the largest in Indo-Russian military
cooperation, which has contributed immensely to
India's indigenization efforts. In another
example, the BrahMos missile, which has been
co-produced by India's Defense Research and
Development Organization and Russia's NPO
Mashinostroyenia, will be jointly exported by the
end of this year.
The Indian Air Force
loves its Sukhois for their domination of the
skies. The Sukhois have replaced the Russian
MiG-21s as the mainstay of India's fighter fleet.
Four contracts have been signed since 1995 for the
supply of Sukhois; the first provided for the
purchase of eight Su-30K and 40 Su-30 MKI, the
second of 10 Su-30 K, the third for licensed
production of 140 Su-30 MKI, and the most recent
in March for 40 Su-30 MKI.
What has irked
India now is not only the hike in the cost of the
fighters but also the suddenness with which the
Russians raised the issue. As recently as March,
the Russians had not indicated any problem with
the cost-escalation rate of 2.55%, complain
officials.
The Russians attribute the
higher costs to the depreciation of the US dollar
and the strengthening of the ruble, as well as
double-digit inflation in Russia.
As for
the Gorshkov, it seems that the aircraft carrier
will arrive only around 2010 instead of next year.
Refurbished at a cost of $1.5 billion, which
includes 16 MiG 29K aircraft, the Gorshkov project
is now going into a cost overrun of more than $113
million - and there were no provisions for this in
the contract.
Last week, the Russians told
the Indian delegation that the delivery of
Gorshkov is being held up by a funds crunch at the
Sevmash shipyard in northern Russia, where the
carrier is being refurbished. They said the
shipyard had grossly underestimated the length of
cabling the carrier needed. The Russians told
India that if it wants the carrier delivered on
time, Delhi will have to cough up more. India is
concerned with the delay as its other aircraft
carrier, INS Viraat, is due for retirement soon.
Indian officials point out that much has
changed in Russia's dealings with India. In the
past, Moscow might have indulged India with
"friendly prices" and allowed a
foreign-exchange-strapped India to pay for
purchases in rupees. But today things are
different: Moscow wants to hike rates after
contracts are finalized. Yet Russia says
little has changed in its approach to India. With
regard to the cost escalation for the Sukhois, it
says that as a special gesture to India, it will
consider reducing the proposed rate of 5% to 4.5%.
It has also said it will continue with the current
2.55% annual escalation rate if India is willing
to pay with the more stable euro.
The
Sukhoi and Gorshkov troubles come close on the
heels of a spat over allowing each other's
civilian aircraft into their airspace. When Russia
decided to ban Air India and Jet Airways from its
airspace this month, India hit back by barring
Aeroflot and Transco. An open collision was
avoided with the two sides agreeing to maintain
the status quo of an earlier bilateral
civil-aviation agreement.
Officials say
that while India remains appreciative of the
Russians for providing it with military equipment
when the West had been reluctant to do so during
the Cold War years, India nonetheless has had
problems with Russian military supplies.
Indian military officials have been
irritated for some time with the severe shortage
of spare parts and the huge delays that dog
delivery of Russian equipment. Delivery of the
Sukhois, T-90S main battle tanks and Talwar-class
stealth frigates have been delayed by years. It is
not just with regard to supply of new acquisitions
that the Russians are running late, but repair and
overhaul of past acquisitions are also behind
schedule, complain officials.
India has
also been concerned with the unreliability of some
Russian weapons systems. The Defense Ministry has
reportedly expressed its unhappiness to the
Russians over the reliability of the Appassionata
navigation systems for the 10 Kilo- or
Sindhugosh-class 877EKM submarines as well as the
large number of Uran subsonic anti-ship cruise
missiles in the Indian inventory. India wants more
solid assurances from the Russians on maintenance
of delivery schedules of contracted weapon
systems, uninterrupted supply of parts, and
life-term product support.
Indian defense
officials say the country's problem with
purchasing weapons systems from its new allies
(read the Americans) is that the latter have no
qualms about selling the same systems to India's
adversaries. In this regard, the record of India's
"old friend" - Russia - is much better, though not
completely clean.
India is looking to buy
126 multi-role combat aircraft, and several
aviation companies are in the race for the
$6.5-billion-to-$10-billion deal - one of the
single largest fighter plane contracts in the
history of aviation. The ongoing spat over the
Sukhois will be keenly watched by companies such
as Saab, Dassault, Boeing and Lockheed Martin,
which are among the fierce contenders for the
deal.
In February, during Aero India 2007
in Bangalore - India's answer to Britain's
Farnborough air show - the Russian campaign to
seal fighter deals with India focused on the
long-standing defense relationship between the two
countries. "The pride of being with India for 44
years," screamed billboards put up across
Bangalore.
India insists it remembers this
decades-long partnership, especially Moscow's
support for India during troubled times in the
past. But India has become more demanding of this
partner. It wants Russia to remain the reliable
partner it once was and to stand by its promises,
whether with regard to prices or punctuality. Or
India might just go elsewhere.
Sudha
Ramachandran is an independent
journalist/researcher based in Bangalore.
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