Security

Full Text: French Report on Dassault Saying Reliance JV is 'Imperative and Obligatory'

An internal Dassault document describes the joint venture with Reliance as "compensation" for the Rafale deal.

On October 27, 2017, Indian businessman Anil Ambani, chairman of the Reliance Group conglomerate who is close to India’s prime minister Narendra Modi, warmly embraced French defence minister Florence Parly who had arrived in the central Indian city of Nagpur for the inauguration of a site destined to manufacture parts for 36 French-built Rafale fighter jets Paris had sold to New Delhi in a deal signed in 2016 worth 8 billion euros.

Accompanying Parly to the site in central India was Eric Trappier, CEO of Dassault Aviation, manufacturer of the Rafale.

The Nagpur site, which is also to assemble Dassault’s Falcon business jets, is a joint venture between the French aerospace group and Reliance, which was handed the role as the Indian industrial partner in the Rafale deal – the result of what is called an “offset” agreement to benefit the local economy. Unveiling a ceremonial foundation stone, set on a piece of turf under a marquee, the French defence minister hailed the ‘Dassault Reliance Aerospace Limited’ joint venture as being “an example of mutually beneficial technological partnership”.

But according to an internal Dassault document obtained by Mediapart, a senior management figure of the French group told staff representatives that the joint venture with Reliance was agreed as a “compensation” in the Rafale deal and that it was both “imperative and obligatory” for Dassault in securing the fighter contract.  

Meanwhile, the inauguration of the new plant close to Nagpur has since proved something of a mirage, for the site, initially due to begin activity this year, remains largely unbuilt. There is just one construction, which resembles a warehouse, and a piece of land under development, as shown in the photo below taken today, October 10th, by a journalist commissioned by Mediapart. It was in August 2015, and with the help of subsidies from the surrounding state of Maharashtra, that Reliance bought 119 hectares of land close to Nagpur’s Mihan airport for a sum equivalent to 7.5 million euros.

The single building on the Nagpur site of the ‘Dassault Reliance Aerospace Limited’ joint venture plant, October 10, 2018. © Monica Chaturvedi/Mediapart

This month a detailed complaint alleging corruption in the joint venture deal was sent to the director of India’s Central Bureau of Investigation by Arun Shourie, a prominent economist and former minister, together with lawyer and anti-corruption activist Prashant Bhushan and former minister Yashwant Sinha.

In their complaint, presented on October 4, they accuse Prime Minister Narendra Modi of “abuse of authority” and of carrying out his public duties “dishonestly and improperly”, and “his long-time friend and close associate”, Reliance chairman Anil Ambani, of receiving “undue advantage” for his group which they described as being on “the point of insolvency” before the signing of the Rafale deal. They also accuse former Indian defence minister Manohar Parrikar and Dassault and its boss CEO Eric Trappier of “abetting” the alleged offences detailed in their document.

One lighter comment in the complaint by the trio accompanies an aerial view of the Nagpur site. “Please see if you can find the DRAL facility with a magnifying glass, if possible, in the 289 acres of Dhirubhai Ambani Aerospace Park in the accompanying satellite image of 29th of September, 2018,” they write.

The October 4 complaint accuses Modi of having conspired to annul a work share agreement that, in the early stages of the French bid to supply India’s air force with fighters, was concluded between Dassault and India’s state-owned aerospace and defence corporation, Hindustan Aeronautics Limited (HAL). At the time, the proposed deal with Dassault, initiated with the Indian government prior to Modi’s election in May 2014, was for the purchase of 126 Rafale fighter jets, to be built in India and for which HAL and Dassault, the complaint reads, were to respectively share 70% and 30% of the production.

Instead, Modi was to secure a deal for 36 Rafale fighters, costing twice as much per unit as outlined in the earlier negotiations. The final deal brokered by Modi allowed for a partnership between Dassault and the Reliance Group, which created defence and aerospace arms shortly before and after the inking of the contract. In it, Dassault agreed to re-invest 50% of the 8 billion-euro purchase price of the aircraft in local industrial production, known as an “offset” deal and which is common to many defence contracts. As part of this, Dassault boss Éric Trappier announced in October 2017 that his company was to invest 100 million euros in the Nagpur plant where, he said, production would commence in 2018.

At the end of September this year, members of India’s parliamentary opposition parties lodged an official “memorandum” with the Comptroller and Auditor General of India (CAG) demanding an investigation into the 2016 Rafale deal agreed between Modi and then French president François Hollande, alleging favouritism, mismanagement of public funds, the endangering of national security and the contravention by Dassault Aviation of market regulations.

According to an internal document from Dassault obtained by Mediapart and revealed here, the alliance between the French company and Anil Ambani’s Reliance Group was a “compensation” for the purchase of the Rafales. The document contains a summary by staff representatives of a presentation of the Dassault Reliance Aerospace joint-venture plant in Nagpur made to them on May 11th 2017 by Dassault Aviation’s Chief Operating Officer, effectively the group’s second most-powerful executive, Loïk Segalen.

According to the summary, Segalen told the representatives: “It was imperative and obligatory for Dassault Aviation to accept this compensation in order to obtain the Rafale India export contract.”

Contacted by Mediapart, Dassault Aviation refused to offer any comment on the issues raised in this report.

In an interview with Mediapart published last month, former French president François Hollande, who oversaw the Rafale sale to India, said of the choice of the Reliance Group as local partner: “We didn’t have any say in this matter. It is the Indian government which had proposed this service group, and Dassault who negotiated with Ambani. We didn’t have the choice, we took the interlocutor who was given to us.”

Reliance Group chairman Anil Ambani became involved in the Rafale contract shortly after Indian Prime Minister Narendra Modi met with Hollande in Paris on April 10th 2015, when it was announced that Modi had changed the original terms of the proposed deal with Dassault.

In their complaint lodged this month with India’s Central Bureau of Investigation, Arun Shourie, Prashant Bhushan and Yashwant Sinha write: “Mr. Modi obtained an ‘undue advantage’ from Dassault Aviation, for awarding a contract for 36 Rafale aircrafts in ‘fly-away’ condition, by abusing the authority of his office and doing his public duty dishonestly and improperly. The ‘undue advantage’ has been received by his close associate and friend Mr. Ambani. As a consideration for abusing his official authority and doing his public duty dishonestly, Mr Modi compelled Dassault to choose Mr. Ambani as an offset partner, by way of which Mr. Ambani received, and is receiving, and will continue to receive, for the next 40 years, an ‘undue advantage’. That is to say that though the offence commenced on 10th of April, 2015, it is, as of date, a continuing offence.”

Meanwhile, as Mediapart reported last month, when Hollande visited New Delhi in January 2016, Anil Ambani released a statement announcing his group had agreed to part-finance a film co-produced by the then French president’s partner, the actress Julie Gayet. The announcement was made on January 24th 2016, the same day that Hollande arrived in the Indian capital. The funding for Tout là-haut (English title, To the top) – initially to be 3 million euros but later reduced to 1.6 million euros – was vital for the continued shooting of the film, which tells the story of French snowboarder Marco Siffredi who died descending the slopes of Mount Everest.

Questioned by Mediapart, Hollande said he was “not at all informed” about the film production deal with Ambani’s group, and that he knew “nothing” about the Reliance Group, adding, “this group had no reason to give me any grace [favour] of any sort. I could not even imagine that there was any link with Julie Gayet’s film”.

It remains that Hollande was a key figure in the sale of the Rafale jets to India. At a press conference after meeting with Hollande in Paris on April 10th 2015, Modi, speaking in Hindi through an interpreter, announced: “I have asked President Hollande to supply 36 ready-to-fly Rafale jets to India […] Our civil servants will discuss [terms and conditions] in more detail and continue the negotiations.”

In their complaint to India’s Central Bureau of Investigation, Shourie, Bhushan and Sinha write of the April 2015 discussions in Paris: “It is significant that Mr. Modi chose to keep the IAF [Indian Air Force], HAL, the Foreign Ministry, and even the Defence Minister in the dark about his impending designs. The Foreign Minister was not present in France. The Defence Minister, unaware at the time of the new deal, was reportedly inaugurating a fish shop in Goa. The only two people aware of the impending conspiracy at the time were Mr. Modi and Mr. Ambani.” They note that Ambani had “accompanied” Modi to Paris for the talks. “Evidently, on the date of the commission of the offence both the conspirators were present at the same location and had ensured that other public servants duty-bound to protect India’s public interest and within whose domain the subject matter of the deal squarely [fell] were absent,” they add.

One month before the April 10th meeting in Paris, Dassault Aviation CEO Éric Trappier announced that progress had been made in negotiations with HAL over the contract for 126 Rafale fighters – the number initially envisaged by the previous Indian government. But in early June 2015, Trappier, speaking to the press during a presentation of his company’s new business jet, was to comment that, “36 Rafales is fine for me”, adding: “We will take the leadership in order to choose our sub-contractors. We will take those who are efficient. If they are not, we will have the right to change them, which was not the case in the tender.”

According to a statement released by Dassault on September 21st, the offset deal with Reliance in accordance with “defence procurement procedure regulations”, and that “in this framework, and in accordance with the policy of Make in  India, Dassault Aviation has decided to make a partnership with India’s Reliance Group. This is Dassault Aviation’s choice, as CEO Eric Trappier had explained in an interview published in MINT newspaper on April 17, 2018”.

A Reliance group PR photo of François Hollande (left) meeting with Anil Ambani at the Eysée Palace in January 2017: Hollande told Mediapart he had known “nothing” about the Reliance Group. Credit: Reliance

A Reliance group PR photo of François Hollande (left) meeting with Anil Ambani at the Eysée Palace in January 2017: Hollande told Mediapart he had known “nothing” about the Reliance Group. Credit: Reliance

One of the key issues is that Ambani’s Reliance Group, mostly centred on telecommunications activity and deeply in debt, was unknown in the aeronautic and defence industry. One month before the new Rafale contract was established, Ambani’s group took a stake in Indian defence sector company Pipavav Defence & Engineering. Ambani’s defence arm, Reliance Defence, was established just 12 days before Modi visited Paris in April 2015, when the new deal was announced, and on April 24th 2015, two weeks after that visit, Ambani created Reliance Aerostructure Limited, which was to become Dassault’s partner in the joint venture. “It is crystal clear that Mr. Modi compelled Dassault to offer an undue advantage by way of offsets in exchange for ensuring that he killed the old deal and offered the new one to Dassault,” write Shourie, Bhushan and Sinha in their complaint this month. “Mr. Modi and Mr. Ambani had acted in a premeditated concert to keep everyone else in the dark and at the very last moment, Mr. Modi himself changed the deal and presented a ‘take it or leave it’ scenario to Dassault and the French.”

When the inter-governmental agreement for the sale of the 36 Rafales was signed by François Hollande and Narendra Modi in January 2016, not all of the financial issues in the deal had been settled, and it was not until September that year that the re-investment into local industrial partnerships of 50% of the value of the contract was finally agreed by Paris. That was also when French defence minister, Jean-Yves Le Drian, signed off the various technical conditions in the contract.

It has been alleged that Dassault raised the per unit price of its fighter jets to partly compensate the requirement of re-investing in India half of the sale price. According to the complaint lodged by Shourie, Bhushan and Sinha, the cost per aircraft rose by 118 million euros to total 188 million euros.

When the joint venture with Reliance was sealed, the Indian group had not yet received an official licence for its new industrial activity. When it finally did receive a licence, this was specifically for the manufacturing and servicing of military planes and helicopters, observe Shourie, Bhushan and Sinha, which excluded the option of assembling Dassault civilian business jets, as included in the terms of the joint venture.

Ambani, they write, “is not engaged in the manufacture of any defence products or providing of defence services. He has no machinery. No manufacturing plant. No Research & Development.

No technical know-how. No competent human resources in defence. No supply chain. No access to raw materials required. Mr. Ambani makes little to no investment in these Joint Ventures. To illustrate, Reliance Rafael Defence Systems Private Limited, is a J.V. with Israeli firm Rafael […] Mr. Ambani has made an investment of ZERO rupees in this venture thus far. Of course, this J.V. does not manufacture anything. All of these are dummy companies.”

Anil Ambani did not reply to Mediapart’s request for an interview.

This story has been republished exclusively with permission from MediapartThe original French version can be read here

Join The Discussion