Deep historical ties and high volume trade apart, serious challenges confront Indo-Russian Defense Ties
NUCLEAR SUBMARINES, Heavy Battle Tanks, Fighter Jets and Aircraft Carriers - this is a just partial list of the current defence trade items between India & Russia, which is estimated to be worth upto $10 billion by 2010. For three decades and more, Russia has been, and today still is, India's largest trading partner.
The Russian defence industry, which used to enjoy a huge monopoly in the Indian market, has however in recent times found it very hard to hold on to its market share. Since 1992, when India and Israel established full diplomatic ties, Israel has grown exponentially to become India's second largest defense partner expected to overtake Russia in coming years. European and American defense companies are too making the most of the 'liberalization' of Indian Defense. And if competition from Western Defence giants was not enough, the growing thaw in Indo-Russian defence relations is making it even harder for Russia to maintain its dominance in Indian defence.
BrahMos - Indo Expo 2006 Fiasco
The friction first became public when, for the first time, Russian missile makers accused the BrahMos Aerospace Pvt. Ltd. of using unfair marketing practices for the promotion of the PJ-10 BrahMos Supersonic cruise missile. Brahmos Ltd. is a Joint Venture between India and Russia and manufactures state-of-the-art cruise missiles suitable for land, sea and air based launch platforms.
The spat occurred in a defense exhibition held in Indonesia (Indo Expo 2006) as marketing initiatives of BrahMos clearly overshadowed all of the Russian missile exhibitors. Accusations were exchanged to-and-fro but the incident highlighted the growing friction between the Indian and Russian defence industry.
Russia had always viewed India as a perennial market and signs of India becoming an equal competitor was not being taken very well in Moscow. And instead of fair and healthy competition, the Russians resorted to allegations, accusations and political/diplomatic maneuvering. The first signs of Russia's growing incompatibility with India's evolving defense industry.
Cost Reviews for Concluded Deals
In May 2007, Russia pushed for an overall review of all defence deals signed between the two nations. Russia lobbied passionately for increasing the price even for deals that were already signed. The Russians cited the appreciating Rouble vis-a-vis the U.S. Dollar, and while the Russian concerns would force them to increase the price of upcoming deals, their desire to review the price of deals already concluded did not go down too well with the Indian Ministry of Defence.
The prevailing feeling is that Russia has not acknowledged the fact that India's options today are far greater than when Russia enjoyed a monopoly in the Indian market back in the 70's, 80's and early 90's. Today India can purchase European, American and Israeli arms and neither finances nor diplomatic ties are an hindrance. India does enjoy excellent ties with traditionally U.K. and France and the relations with the United States have made rapid strides in recent years with India & the U.S. having signed significant strategic agreements in recent years.
Cost Overruns & Delays
Despite numerous denials and attempted cover-ups by the Indian Navy, the Defense Minister had to acknowledge and confirm media reports that the Admiral Gorskhov/INS Vikramaditya deal was facing cost overruns and potential delays. The reports initially appeared in Russian and then Indian media outlets and the Navy tried first denying and then scaling down the scale of problems but the Defence Ministers statement was all but a confession for the same.
This is not the first major defence deal with Russia to face such problems. The Indian Army's MBT T-90S is also facing major issues wrt munitions, suspension and overall performance in the Indian desert conditions. Some in the Armed Force have a preference for non Russian arms and such can be understood given the track record so far.
As a result many of India's current purchases from Russia have multi-national inputs for example the Air Force Sukhoi 30 MKI fighter jet deal has a great deal of Indian and Israeli systems embedded on the Russian Su-30 platform. The PHALCON AWACS deal too is of a similar nature.
Russians & the Integrity Pact
In 2006, the MOD released a Defence Procurement Manual which prominently contained an Integrity Pact which barred bidders from using middle men aka. defence agents to win national contract. In a surprising admission, the Russian side informed MOD that some clauses in the Integrity Pact were "conflicting" with Russian domestic laws and that they wouldn't sign the same.
Under the Integrity Pact, if it is found that either side had agents or paid commissions then criminal cases can be initiated by India and the other side has to cooperate. Arms dealers are banned under the defence procurement policy 2006. April 2007 saw intense negotiations between the Ministry of Defence and Russian representatives to ensure that the latter's stand do not "delay" India's defence modernization and massive procurement programmes; but then delays were witnessed for one reason or another in almost all major defence deals with Russia.
Future Trends
The Russians so far have come off to be pretty inefficient and rather combative despite enjoying a major stake of the Indian defence pie. Instead of leveraging their present position as the dominant player, they've creating openings for Israelis, Americans and Europeans to venture. Even CIS states such as Ukraine and Kazakhstan have won defence deals with India where Russia failed to seize the initiative.
While Russia will continue to be a major partner for India in the coming decades, the Russian industry needs to learn to compete with the West, the Israelis and domestic defense players if it chooses to be dominant in coming years. The fact remains that the defence market today is a buyers market and that India is one of the largest defense importers in the world.
