Internal Dassault Document Says Reliance JV was a 'Trade-off' for Bagging Rafale Deal: French Report

According to a report published in Mediapart, Dassault's partnership with Anil Ambani's Reliance was "mandatory" and "imperative" to securing the Rafale sales contract.

New Delhi: Dassault Aviation agreed to enter into a  joint venture with Anil Ambani’s Reliance Defence as it was presented as “mandatory” and a “trade-off” if the defence major were to bag the 36 Rafale jet deal, according to a new report published in French investigative website Mediapart.

According to the Mediapart story, which cites an internal Dassault document, the agreement with Reliance was presented as a “trade-off” to obtain the Rafale sales contract.

This revelation, if true, will likely further weaken the Narendra Modi government’s claims that it had nothing to do with the selection of Reliance Defence as an offset partner for the Rafale deal.

Mediapart quotes a presentation made by Dassault’s deputy chief executive officer Loik Segalen to the company’s staff representatives in Nagpur in May 2017 where he describes the Reliance partnership as “imperative and mandatory” to get the Rafale export contract to India.

The two key paragraphs from the Mediapart story are reproduced below, both in French and translated English.

“C’était une vraie fausse inauguration. Une « première pierre » symbolique posée sur du gazon prédécoupé, sous un chapiteau de circonstance, à Nagpur (centre de l’Inde), mais qui annonçait le début de la construction de la « future usine » Dassault-Reliance. Selon un document interne à Dassault obtenu par Mediapart, un haut cadre du groupe d’aviation avait expliqué aux représentants du personnel que la joint-venture était une « contrepartie », « impérative et obligatoire » pour décrocher le marché du Rafale.”

“It was truly a false inauguration. A symbolic ‘first stone’ was placed on pre-cut turf, under a [tent/capital] of circumstance, in Nagpur (central India), but it announced the beginning of construction of the ‘future factory’ of Dassault-Reliance. According to an internal Dassault document obtained by Mediapart, a senior executive of the aviation group had explained to the staff representatives that the joint venture was a “trade-off” , “imperative and mandatory” to [obtain/take off] the market for Rafale.” [Emphasis added by The Wire].

The second paragraph, shown below, quotes the presentation made by Segalen.

Chez Dassault Aviation, selon un document obtenu par Mediapart, l’alliance avec Ambani a effectivement été présentée comme une « contrepartie » du contrat de vente des Rafale. Le directeur général délégué de Dassault Aviation, Loïk Segalen, l’a dit clairement le 11 mai 2017 lors d’une présentation de la joint-venture « Dassault Reliance Aerospace » de Nagpur aux élus du personnel : « Il était impératif et obligatoire pour Dassault Aviation, d’accepter cette contrepartie, afin d’obtenir le contrat export Rafale Inde », a déclaré le no 2 du groupe, selon un compte-rendu établi par les élus du person

At Dassault Aviation, according to a document obtained by Mediapart, the alliance with Ambani was indeed presented as a ‘trade-off’ for the Rafale contract of sales. Dassault Aviation’s deputy chief executive officer  Loïk Segalen said this clearly on May 11, 2017 during a presentation of the joint venture ‘Dassault Reliance Aerospace’ to staff representatives: “It is imperative and obligatory for Dassault Aviation to accept this [trade-off/counterpart] to obtain the export contract (for?) Rafale India,” declared the number 2 of the group, according to a report prepared by staff personnel.

Over the last six months, the Rafale deal has been a source of political controversy, with opposition parties and civil society stakeholders levying allegations of crony capitalism against the Modi government.

These accusations were given greater teeth in the last week of September 2018 when former French president Francois Hollande told Mediapart that India had proposed Reliance’s name as part of the new negotiations surrounding the down-sized Rafale deal.

Hollande’s remarks came as a surprise as it directly contradicted claims made by the Modi government. After the first Mediapart report, the Indian defence ministry reiterated its stance that it had nothing to do with the selection of Reliance as an offset partner. 

Freely chose Reliance says Dassault

Dassault Aviation on Thursday reiterated that its partnership with Anil Ambani’s Reliance Defence as an an offset partner with the Rafale jet deal was born out of free choice.

“In order to deliver some of these offsets, Dassault Aviation has decided to create a joint-venture. Dassault Aviation has freely chosen to make a partnership with India’s Reliance Group. This joint-venture, Dassault Reliance Aerospace Ltd (DRAL), was created February 10, 2017,” the Dassault press release stated.

In response to Segalen’s presentation to company staff,  in its press release, Dassault notes that “in compliance with French regulations”, the company executive informed the Central Works Council of the creation of the Dassault-Reliance JV “in order to fulfil some of the offsets commitments”.

“In compliance with French regulations, Chief Operating Officer Loïk Segalen informed, May 11, 2017, the Central Works Council of the creation of the DRAL joint-venture in order to fulfil some of the offsets commitment,” the company said.

While Dassault has not clarified what its executive meant by a “trade off”, a defence industry observer, who declined to be identified, told The Wire that Dassault would likely argue that Segalen’s presentation was meant to convey was that offsets in general were “mandatory” or a “trade-off” for the Rafale deal and not the Reliance partnership in specific.

French journalist Julien Bouissou, the South Asia correspondent for Le Monde, has said on Twitter that the Mediapart report does not, in fact, contain any new information. “In May 2017, Dassault Informed French trade unions about the construction of a plant in Nagpur, and explained to them why that plant could not be built in France. (because of the offset),” he said. “Please note that in France, the top management of a company has to inform the Central Works Councils (trade unions) about their strategy/important decisions. And in that case, the important decision conveyed to the Central Work Council, was the construction of a plant in India that will not create jobs for French workers. It’s about French labour laws, not so much about Anil Ambani.”

The Wire has written to both Reliance and India’s defence ministry asking for their comments on the matter and this story will be updated if and when a response is received.

Note: This story was updated at 9:40 AM on Thursday to add Dassault’s response and statement.

Note: This story was updated at 11:30 AM on Thursday to add Julien Bouissou’s perspective.