India, Russia Look to Massive Defence Deals to Bring Back that Loving Feeling

From Kamov helicopters to Admiral Grigorovich-class stealth frigates, deals adding up to nearly $7 billion, are expected to be signed.

New Delhi/Goa: Indian government officials are hoping that this week’s BRICS summit in Goa will not only serve as a platform to wrap up a year’s worth of negotiations on a number of big-ticket defence deals but also firmly reaffirm Moscow and New Delhi’s historically strong defence partnership.

Defence purchases, adding up to anywhere between $5 billion to $7 billion, will be announced on Saturday and Sunday, according to multiple people with direct knowledge of the matter.

While relations between Russia and India have been listless over the last year, mostly due to larger geopolitical stakes, Indian defence ministry officials insist that the deals that will be announced over the weekend represent ultimately a future investment in the Indo-Russian defence relationship.

“Even within the defence relationship of course there have been minor cracks. This weekend is not only about agreeing to big purchases and signing multi-year deals. For instance, one sore point ever since Parikkar took over was regarding the poor conditions of the Sukhoi fighter aircraft and their maintenance. At any given point of time, 30%-50% of the Sukhoi fleet is not operational due to maintenance issues. Spare parts and servicing have been bones of contention and this weekend, a creative arrangement is expected to be announced,” a senior defence analyst, who declined to be identified, told The Wire.

Russia, on its part, has been equally eager. Two massive defence deals were confirmed in advance by the Russian side yesterday evening: The first is the purchase of the S-400 LRSAM anti-aircraft missile systems (a $4.5-billion inter-government agreement that has been long in the works, but was officially announced by the Kremlin Thursday night). The second, which was announced by the Rostec State Corporation, was a (reportedly $1.5-billion) “contract for export and joint production for 200 Kamov-226T helicopters.

The final touches to these two defence acquisitions, according to sources, took place at the meeting of a joint-working group (JWG) on Indo-Russian military-technical cooperation, which took place in New Delhi in early September. The meeting was largely centred around expediting some of the bigger defence purchases, some of which had stalled for a number of last-minute reasons.

“The JWG meeting also came at quite a crucial time. The LEMOA pact with the US had just been officially signed and there was the issue  of Russia potentially conducting its first-ever military exercise with Pakistan later that month,” a defence ministry official, who was privy to some of the discussions, told The Wire.

At a press conference in Goa on Friday, Indian ambassador to Russia Pankaj Saran pointed out that it would be unfair to view the Indo-Russian relationship ony through the prism of the recent Russian-Pakistan military exercises.

“I don’t think it is fair to reduce the relationship which has developed over decades to an incident which took place few days ago,” Saran said.

Indeed, as industry experts and officials point out, the larger circumstances surrounding the Indo-Russian relationship had very little impact on the countries’ defence partnership. The deal themselves have been stalled or had a few obstacles due to budgetary concerns, ‘Make-in-India’ pressures, technology transfer issues and work-share agreements.

Nevertheless, what’s on the military menu, which deals’ details still need to be sorted and what concerns remain?

Kamov helicopter deal

The need to acquire, develop or jointly produce a new fleet of light utility helicopters has been floating around for a number of years. Multiple estimates show that India needs around 800 light choppers to replace the ageing Cheetah/Chetak fleet. The Russian deal for 200 Ka 226 helicopters, first announced in May 2015, represents therefore the first major line of helicopters that will replace the old guard.

According to industry sources, the Kamov helicopter deal was delayed initially due to a number of unnecessary bureaucratic hurdles and then later due to pressures from the Indian side over co-production and technology transfer possibilities.

“From May-June to October, there was usual back-and-forth over sending specifications and deciding on technical issues. From October to December however curiously the Russian side announced intentions to form joint ventures with a number of Indian private players, but ended up junking that plan in the end,” an industry source with direct knowledge of the matter said.

“First there was the potential venture with the Guragon-based Sun Group, which was scrapped. Then a letter of intention was sent by the Russian side to form a subsidiary with Reliance Infrastructure, tentatively called Reliance Helicopters. Then finally in January 2016, a few months after Modi’s visit to Moscow, Rostec settled on HAL as a potential partner.”

The Rostec statement released on Thursday doesn’t identify who the India partner will be but states that a “joint production facility” would be set up and that a “long-term contract for after-sales servicing of Russian-made helicopters” was currently under negotiations.

“The helicopter deal is massive for India, it is a proper joint co-production programme. It also, in letter and spirit, endorses the Make in India project as Rostec will look to export the choppers from its India facility eventually. The only stickler point for India was that the first batch of copters may be off-the-shelf,” said Anand Bhatia, a defence analyst.

S-400 missiles deal

The anti-aircraft missile deal, some military observers say, has the potential to be one of the largest ever deals between Russia and India (at least until the details surrounding the fifth-generation fighter aircraft are sorted).

The missile systems were pitched to India over a year ago and approval for the purchase was given by Parikkar and the defence acquisitions council back in December 2015. However, in May 2016, media reports suggested that the deal was going through a number of budgetary obstacles.

Defence News quoted at the time anonymous defence ministry officials who said that the S400 deal would be postponed primarily because “after the global buy of $8.9 billion for Rafale fighers, $1.5 billion for very short range air defense man-portable systems and $1.5 billion in short-range surface-to-air missile systems… there is no money for other foreign purchases,”

Multiple sources told The Wire that slightly cheaper Rafale deal and Parikkar’s tapping into PSU advance payments cleared a majority of these concerns.

“At the end of the day, it’s an anti-aircraft missile system. These things are not cheap. And if you look at it from another perspective, what is the cost if something gets through India’s airspace borders?,” said Rahul Gangal, a partner at Roland-Berger, a defence consulting firm.

What else?

What has not yet been officially confirmed, but has been heavily rumoured in the run-up to the BRICS summit and has been mentioned in earlier Indo-Russian meetings, is the deal for four Admiral Grigorovich-class steal frigates and the groundwork for the much-vaunted “fifth generation fighter aircraft (FGFA)” which is being jointly developed by both countries.

“Nobody at the moment is expecting an agreement for the FGFA to be signed. There are too many details left and over the last four months there have been a number of disagreements over the work-share composition. However, an initial framework agreement could likely be signed,” a senior industry source said.

The Pak factor

Ahead of the 17th bilateral summit, Indian officials indicated that Prime Minister Modi is likely to take up the issue of Russia’s defence relationship with Pakistan.

“Where there are issues of interest to either India or Russia, I imagine that it will be discussed,” said Indian ambassador to Russia, Pankaj Saran in answer to a query if Modi was likely to himself press the issue in light of India’s recent hardline position on cross-border terrorism.

Russia and Pakistan recently held their first army exercise a few days after the attack on the Indian army brigade headquarters in Uri. India had blamed Pakistan for being behind the attack. While the exercise was pre-scheduled much earlier, India had objected after the Russian defence ministry had first claimed that the exercise would be held in Pakistan-occupied Kashmir. This was later denied by Russia.

Saran, however, tried to make a difference between this wrinkle – and the greater arc of the Indo-Russian partnership.

“I don’t think it is fair to reduce the relationship which has developed over decades to an incident which took place few days ago,” he said.

He added that India had “conveyed our concerns and views to the Russian side”. “We are confident that Russia will reflect on our concerns and that is where we stand now”.

Describing Russia as a “world power” which also has “legitimate interests in Asia-Pacific”, Saran said that there will certainly be discussion on global issues like Syria.

“There are trouble spots. There are some in which Russia has stakes, while in others India has a role,” said Saran.

Putin arrives in Goa at 1 a.m and will check into the presidential suite at Taj Exotica. The bilateral summit will begin with restricted talks between Modi and Putin, followed by an hour of full-delegation level discussions. At around 1.05, there will be an exchange of agreements and a live video link to the foundation laying ceremony for units 3 and 4 of Kudankulam nuclear power plant.

“In the course of last 12 months, several indian companies concluded deals with Rosneft and some other Russian companies. Tomorrow I expect to have some more agreements that will be announced after the summit between Russian majors and some indian companies,” said Saran.

When asked about defence deals which will be signed, he refused to comment.

(With inputs from Devirupa Mitra in Goa)

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