Sunday, 14 October 2018

Reliance Group 2016-17 report spoke of Rs 30,000 crore in offsets, now saying only Rs 6,600 crore



Ajai Shukla
Business Standard, 14th Oct 18

There are different versions of how much business has flowed to Anil Ambani’s joint venture firm, Dassault Reliance Aerostructures Ltd (DRAL), through offsets arising from the Indian Air Force (IAF) purchase of 36 Rafale fighters for Euro 7.8 billion – the equivalent of Rs 59,000 crore (Rs 590 billion), when the contract was signed in September 2016.

In this acquisition, the defence ministry demanded offsets worth 50 per cent of the contract value. That requires Dassault Aviation and its Tier-1 vendors – French firms Thales, Safran Aero Engines and MBDA – to invest about Rs 30,000 crore (Rs 300 billion) in Indian defence R&D, manufacture or services, for discharging their offset liabilities.

The opposition, with Congress President Rahul Gandhi leading the charge, alleges that DRAL has – at the government’s behest – been illegitimately awarded the entire offsets liability of Rs 30,000 crore (Rs 300 billion).

While New Delhi, Paris and Dassault have denied influencing the French prime vendors to discharge their offsets through DRA, they have also indicated that DRAL has benefited from only a small share of the total offsets.

On Thursday, Dassault Aviation chief, Eric Trappier, told AFP in Paris that the offsets would be distributed between many Indian Offset Partners (IOPs), with DRAL getting just one-tenth of the total business.

Dassault Aviation’s website has posted a transcript of Trappier’s interview with AFP in which he states: “[DRAL’s Nagpur plant] should enable us to meet about 10 per cent of these offset obligations. We are in negotiations with about a hundred Indian companies and partnerships have already been concluded with about thirty of them.”

Ten per cent of the total offset value would amount to no more than Euro 390 million (Rs 33.12 billion). However, the Reliance Group itself has admitted it would benefit from offsets worth twice that amount. In a legal notice served in early September on a media house, Reliance Group indicated that it would benefit only from Dassault’s share of offsets, which amounted to Rs 6,600 crore (Rs 66 billion). 

“Dassault’s share in the total offset Export Obligation (sic) is approximately 22 per cent, or Rs 6,600 Cr (Rs 66 billion)… The balance 78% of offsets are to be discharged by other companies such as Thales, Safran and MBDA, etc,” said the notice.

The notice did not touch on the question of whether Thales, Safran and MBDA would discharge any or all of their offsets through DRAL.

Another, far larger offset figure emerges from Reliance Group’s annual report for 2016-17, which states that DRAL would be a “key player” in executing offset obligations worth Rs 30,000 crore (Rs 300 billion).

“Reliance has formed a partnership with Dassault Aviation… through a joint venture (JV) company named Dassault Reliance Aerospace Limited (DRAL)… The JV Company will be a key player in the execution of offset obligation, including the entire Life Cycle Performance Based Logistics for the 36 fighter aircraft; valued at about INR 30,000 crore (Rs 300 billion). This is part of the purchase agreement between the Indian and French governments,” says the report in a section headed “Management Discussion and Analysis.”

Elsewhere, the report elaborates on the proposed Dhirubhai Ambani Aerospace Park, for which the Maharashtra government allotted land at the Multi Modal International Hub at Nagpur (MIHAN). To kick off this project, the [DRAL] Joint Venture shall facilitate the transfer of high end technology, while discharging offset obligations of INR 30,000 crore(Rs 300 billion). This is part of the agreement for purchase of 36 Rafale fighter aircraft for the Indian Air-Force. The scope includes Performance Based Logistics for Rafale aircraft of the Indian Air Force and other manufacturing activity.”

The “Letter to the Shareholders” also repeats this information in different words. 

Interestingly, though, the Reliance Group’s Annual Report for 2017-18 has no mention of Dassault-related offsets.

Sources in Reliance Group, speaking anonymously, say that offset related production is still to begin and it will be years before there is any clarity on what value of offsets DRAL actually manages to discharge. 

Thursday, 11 October 2018

Rafale deal a quid pro quo: French media

French news website Mediapart reports internal Dassault document that says partnering Anil Ambani was a quid pro quo to New Delhi for 36 Rafale deal

By Ajai Shukla
Business Standard, 11th Oct 18

French news website, Mediapart, reported on Wednesday that it had accessed an internal document from aerospace firm Dassault, which stated that partnering Anil Ambani’s defence firm was a quid pro quo to New Delhi for winning a Euro 7.8 billion contract to supply 36 Rafale fighters to the Indian Air Force (IAF).

The French website report states: “Mediapart has obtained a Dassault company document in which a senior executive is quoted as saying the group accepted to work with Reliance as an 'imperative and obligatory' condition for securing the fighter contract.” The executive is identified in the Mediapart report as Loik Segalen, a senior member of the company’s aviation group, from whom the document originated on May 11, 2017.

The joint venture referred to was Dassault Reliance Aerospace Ltd (DRAL), which Anil Ambani’s Reliance Group had formed with Dassault, with the former holding 51 per cent and the latter 49 per cent of the equity. DRAL was set up just days before Prime Minister Narendra Modi and then-President Francois Hollande made the shock announcement in Paris, on April 10, 2015, that the IAF would buy 36 fully-built Rafale fighters from Dassault.

Opposition parties in India have charged the National Democratic Allliance (NDA) government with “crony capitalism” – alleging that government pressure was put on Paris to discharge offset obligations – worth 50 per cent of the value of the contract, or Euro 3.9 billion – through DRAL.

This was endorsed by former French President Hollande, who told Mediaparton September 22 that the Indian government had left Paris with no choice but to do business with DRAL.

Asked by Mediapart, “Who selected Reliance as a partner and why?” Hollande responded: “It was the Indian government who proposed this service group (Reliance Group), and Dassault who negotiated with Ambani. We did not have a choice, we took the interlocutor who was given to us."

Hollande was France’s president in April 2015, and he hosted Prime Minister Narendra Modi in Paris when the latter publicly announced his decision to buy 36 Rafales from Dassault in “flyaway” (or fully built) condition.

Paris and Dassault have issued statements indicating that the decision to partner Ambani was taken by them. But none of those carefully worded statements directly contradict Hollande’s explicit allegation.

Now the Dassault document reported by Mediapartreinforces Hollande’s words.

The Rafale deal has come under concerted attack from India’s opposition parties, which have charged the Modi government with paying an inflated price for 36 Rafales; with endangering national security by cancelling an on-going tender for 126 Rafales; and with “crony capitalism” in selecting the Reliance Group as a partner to Dassault. 

Anil Ambani has not denied benefiting from Rafale-linked offsets. However, The Reliance Group – in a series of legal injunctions issued to various media houses – has claimed that it benefited only from Euro 778 million worth of business, not Euro 3.9 billion.

While all 36 Rafale fighters are being manufactured in France, an offset requirement, which is a part of all Indian defence procurements worth more than Rs 2,000 crore (Rs 200 billion), requires French companies involved in the Rafale deal – Dassault, Thales, Safran Aero Engines and MBDA – to plough back 50 per cent of the contract value into Indian defence production.

Dassault’s Press Statement 

(Saint-Cloud, France, October 10, 2018) – Within the framework of the September 2016 Inter-Government Agreement between France and India, Dassault Aviation has sold 36 Rafale aircraft to India. In compliance with the Indian regulations (Defence Procurement Procedure) and as frequent with such a contract, Dassault Aviation has committed to offsets in India worth 50% of the value of the purchase.

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.

Other partnerships have been signed with other companies such as BTSL, DEFSYS, Kinetic, Mahindra, Maini, SAMTEL,… Other negotiations are ongoing with a hundred-odd other potential partners.

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.

SC: Did govt move to buy 36 Rafale jets from Dassault meet norms of Defence Procurement Procedure of 2016?

Does the decision to buy the Rafale as a govt-to-govt deal meet any of the three conditions specified in the DPP?

By Ajai Shukla
Business Standard, 11th Oct 18

On Wednesday, the Supreme Court (SC), in dealing with three petitions filed against the purchase of 36 Rafale fighters from France, asked for details of the government decision-making that scuttled an on-going procurement of 126 Rafale fighters; and replaced that with the purchase of 36 Rafales from French vendor, Dassault.

The apex court has asked for the details to be submitted in three separate sealed covers on or before October 29. The matter will next be heard on October 31.

The apex court made it clear that it would not examine the technical and commercial aspects of the purchase – that is to say, the suitability of the Rafale or the price at which it was bought. All that the judges will scrutinise is: “the details of the steps in the decision making process leading to the award of the order for the defence equipment in question, i.e. Rafale jet-fighters (36 in number).”

Effectively, the apex court will establish whether, in going in for an Inter-Governmental Agreement (IGA) with France, the government met the conditions and procedures stipulated in the Defence Procurement Procedure of 2016 (DPP-2016).

DPP-2016 governs the procurement of 36 Rafales, while the aborted procurement of 126 medium multi-role combat aircraft (MMRCA) was being pursued under an earlier procedure, i.e. DPP-2006.

The conditions in which the government can process a deal through an IGA is detailed in Paragraphs 104-105 of DPP-2016. Paragraph 106, stipulates the conditions for a “procurement on strategic considerations”.

Paragraph 104 notes: “There may be occasions when procurements would have to be done from friendly foreign countries, which may be necessitated due to geo-strategic advantages that are likely to accrue to our country. Such procurements… would be based on mutually agreed provisions between the Governments of both the countries.”

This paragraph then describes three contingencies when an IGA can be resorted to. The first is when India’s military identifies “equipment of proven technology and capabilities… [while] participating in joint international exercises.” This is not the case with the Rafale procurement, which was already being pursued under a global tender.

The second contingency is “where a very large value weapon system/platform, which was in service in a friendly foreign country, is available for transfer or sale.” This clause does not apply to the Rafale either, since it stipulates that the purchase “would normally be at a much lesser cost than the cost of the original platform/weapon system, mainly due to its present condition.” This condition applies for situations like India’s purchase of INS Vikramaditya from Russia.

The third contingency relates to the purchase of “a specific state-of-the-art equipment/platform, however, the Government of the OEM’s (original equipment manufacturer’s) country might have imposed restrictions on its sale and thus the equipment cannot be evaluated” in the kind of user trials that India demands. This condition does not apply to the Rafale either, which was extensively tested and evaluated in user trials by the Indian Air Force (IAF).

Paragraph 105 of DPP-2016 caters for an IGA that would bind the OEM’s government to ensure “product support over a long period of time” and to “provide for the assistance of the foreign government in case the contract(s) runs into unforeseen problems. 

Paragraph 106 provides for “procurement on strategic considerations”, where “major diplomatic, political, economic, technological or military benefits deriving from a particular procurement may be the principal factor determining the choice of a specific platform or equipment on a single vendor basis.”

This also provides for buying equipment from an OEM who is “not necessarily the lowest bidder (L-1).”

“Decisions on all such acquisitions would be taken by the Cabinet Committee on Security (CCS) on the recommendations of the DPB (Defence Procurement Board)”, says DPP-2016.

One analyst says the government could use Paragraph 106 to justify the 36 Rafale procurement on the grounds of French willingness to equip them with nuclear weapons delivery ability. However, the DPB note and the CCS note would have to support such a contention.

Tuesday, 9 October 2018

The Pakistan Army conundrum



By Ajai Shukla
Business Standard, 9th Oct 18

The crash-and-burn denouement of New Delhi’s most recent attempt to resume engaging Islamabad is hardly tragic. If anything, the swiftness of the collapse of the proposed meeting between External Affairs Minister Sushma Swaraj and Foreign Minister Shah Mehmood Qureshi on the sidelines of the United Nations General Assembly (UNGA) might make Indian and Pakistani policymakers realize that fundamental contradictions in the framework of India-Pakistan engagement pre-ordain the failure of every peace initiative. On the one hand, it is ludicrous for India to demand perfect conditions as a pre-requisition to dialogue; on the other hand Pakistan tempts fate by keeping Jammu & Kashmir (J&K) on the boil with talks in the balance.

With dialogue in cold storage, the mood in Kashmir is bleak. Local body elections on Monday saw a dismal turnout. India’s army continues combating a renewed insurgency on the Line of Control (LoC) and in the hinterland. Ceasefire violations are up almost six-fold, from under 200 in the last year of the United Progressive Alliance (UPA) to 1,128 already this year. Compared to 2013, when 30 Indian soldiers were killed in J&K, more than twice that number died in each of the last two years. This year could be as bloody.

Militancy, which was declining precipitously after 2010, has revived robustly. In 2014, when the NDA government was formed, there were only 150 armed militants in Kashmir. But since 2016, Kashmiri anger at the growing anti-Muslim climate across the country and the killing of militant commander and social media darling, Burhan Wani, has fuelled a rush to the gun. Militancy flourishes, despite the killing of 500 armed militants in two years. Kashmiri youngsters are joining the fight knowing the odds are stacked against them and that they cannot expect to survive six months. And when they are killed, their emotion-charged funerals see other youngsters taking their place. Pakistan needs to do little to keep this meat-grinder churning. A Pakistan-fuelled insurgency has transformed smoothly into a predominantly Kashmiri one. 

Meanwhile tensions on the LoC remain inflamed with continued incidents of mutilation of soldiers’ bodies. India’s army chief has threatened more than once that Pakistan’s army would pay a price for its barbarism. However, India’s sensible restraint, given the dangers of uncontrolled escalation in a nuclear backdrop, restricts the punishment that can be imposed on Pakistan’s military. The bottom line clearly is: We can make the Pakistan army hurt, but we cannot make it change.

That raises a fundamental question: Does the combination of stable nuclear deterrence and the Pakistan military’s implacable hostility render inevitable the continuation of the low-grade conflict between the two countries?

Well-informed observers of Pakistan, most recently India’s former ambassador to Islamabad, Sharat Sabharwal, have said Pakistan is not a monolith, but an amalgam of several constituencies, each of which must be engaged separately, on its own terms. There is the Pakistan Army, with its supposedly unwavering institutional interest in low-grade tensions with India, in order to maintain its salience as the defender of Pakistan. There are the Pakistan Army’s jihadi proxies – India-focused groups like the Lashkar-e-Toiba, Jaish-e-Mohammed and Hizbul Mujahideen – which do the army’s bidding; and the increasingly anti-India television media. But there are also pro-India groups, such as mainstream politicians that vie with the army for political power, and business and commercial groups that see benefit in better trade relations. Then there are the Pakistani masses, who are not viscerally opposed to India, but who coalesce behind the military-led “deep state” when an Indian threat arises.

While this notion of “multiple Pakistans” is valid, the conclusions we draw from this are mostly fanciful. They centre on the idea that India should focus on the constituencies that favour better relations with India, most notably mainstream politicians, the business class and the Aam Pakistani. This would supposedly generate pressure on Pakistan’s military not to hold them hostage to its self-serving enmity with India.

This is a seductive theory from the Indian standpoint, resting on the comforting presumption that many Nice Pakistanis are forcibly counterposed against All Us Nice Indians by a Bad Pakistani fringe – the army, the jihadis and the increasingly rabid television media. However, for the most part, Pakistan’s citizens adore their army. It is hard to figure whether this stems from a peculiarly Punjabi love for the uniform, or the absence of other functional institutions to admire, or simply that the Pakistan Army has channelised towards itself the fawning hysteria once lavished on world-class cricket, hockey and squash players that have left no successors. It surely says something that an ageing cricket superstar was elected prime minister, albeit with significant help from men in khaki.

Instead, a realistic peace process would have to evaluate and find ways to address the core concerns of the Pakistan Army. Indian “muscularists” would argue this is a fruitless endeavour, since the Pakistan Army wants only to reduce India to smoking ruins, onto which it would stomp in jackboots and pluck off Kashmir. Even if that were true, the army remains a popularly trusted institution that controls the levers of power. And General Qamar Javed Bajwa, more than his recent predecessors speaks like a practical man with more achievable objectives.

In evaluating what could attract the attention of Pakistan’s generals, New Delhi could draw ideas from its own strategic concerns about China. We in India know what it is like to neighbour a giant country with an economy, defence budget and military several times larger than our own, and which has once, not long ago, dealt us a shocking military defeat that still scars our collective psyche. To extend the analogy, that country too is rapidly outpacing us and we sneakily admire its success. Providing a model for emulation, we refrain from fomenting terrorism or internal discord in that country and it refrains from deploying serious military force on its border with us. Wisely, it refrains from issuing regular threats to teach us a lesson. The India-China model of managing a hotly disputed border and a conflicted strategic relationship provides a model to emulate in the India-Pakistan context. 

Any discussion on creating security for India would have to be based on creating a mutual security for Pakistan – a radical idea in a relationship where both armies expend enormous energy into creating insecurity for each other. Broaching ways to fundamentally transform this dynamic has the potential to grab the attention of the Pakistani corps commanders. Whose security comes first – India’s or Pakistan’s – is a chicken and egg conundrum. But, to mix metaphors, you can’t make an omelette without breaking eggs.

Monday, 8 October 2018

How the S-400 will add teeth to an upgraded air defence network


By Ajai Shukla
Business Standard, 8th Oct 18

When Air Chief Marshal BS Dhanoa addresses a parade on Monday at Hindon to mark the 86thanniversary of the Indian Air Force (IAF), he will welcome the $5.43 billion purchase last week of five regiments of S-400 surface-to-air missiles (SAMs) from Russian air defence specialist, Almaz-Antey.

When the long-range S-400 enters service in 2021, it will greatly enhance the IAF’s capability for national air defence – its primary responsibility to detect, intercept and shoot down enemy aircraft attempting to penetrate Indian airspace. Given the IAF’s depleted numbers – it has just 31 fighter squadrons against an authorized 42 – the S-400’s capabilities are essential.

With cruise missile and air strikes being India’s most likely response to a hypothetical Pakistani terrorist outrage in the future, retaliation from the Pakistan Air Force (PAF) is inevitable. That is where the S-400 will come into play.

Experts regard India’s current air defence set-up as weak, with numerous gaps that a skilled adversary would exploit. Besides the shortage of fighter aircraft, India’s radar network – which should ideally detect PAF fighters as soon as they take off from their bases – has insufficient range and gaps in coverage. The IAF’s Soviet-era and Russian-origin SAMs, such as the Pechora SAM-3 and the OSA-AK SAM-8, have inadequate ranges of under 35 kilometres.

By 2021, when the S-400 enters service, India’s air defence will be improving. The IAF will by then have its full compliment of 272 Sukhoi-30MKIs, and the first Rafale squadron and two Tejas squadrons would have entered service.

Simultaneously, the capable Indo-Israeli medium range SAM (MR-SAM) – with a detection range of 150 kilometres, a strike range of 70 kilometres and a far higher hit probability than current missiles – would be getting inducted in significant numbers. The IAF, which funded 90 per cent of the MR-SAM’s development cost of Rs 10,075 crore (Rs 100.75 billion), has ordered 18 units.

Meanwhile the Akash SAM, developed by the Defence R&D Organisation and built by Bharat Electronics Ltd (BEL) is also being inducted into service in numbers. The Akash has a range of just 25 kilometres, but there is a project to upgrade that.

National air defence

National air defence includes multiple layers of surveillance sensors and strike capabilities – both defensive and offensive. The most offensive air defence option, and one to which the IAF would allocate most aircraft at the start of a campaign, is to knock out enemy fighters on the ground. This requires IAF strike aircraft to penetrate deep into enemy territory after jamming enemy radars, drop cluster bombs to destroy enemy aircraft and destroy runways with deep penetration bombs.

The Israeli Air Force knocked out almost the entire Egyptian, Syrian and Jordanian air forces on Day One of the 1967 Six Day War, but this is unlikely in the India-Pakistan context. Therefore, the IAF’s air defence plan must also cater for retaliatory strikes by PAF fighters.

Multiple layers of sensors detect incoming fighter strikes. Amongst the most reliable, surprisingly, is a chain of “mobile observation posts” (MOPs) all along the border – each one a single human with a radio set, trained to identify and report enemy aircraft flying across the border.

Behind the MOPs, a chain of surveillance radars looks into enemy airspace to detect aircraft activity. Looking even deeper are “Airborne Early Warning Command and Control (AEWC&C) systems, like the IAF’s three Phalcon systems, mounted on Russian IL-76 transport aircraft. From on high, where the earth’s curvature does not obscure visibility, they detect even low-flying aircraft at ranges of 400 kilometres and direct IAF fighters precisely onto them.

All these air defence elements are networked through data and voice communication channels to an autonomous “integrated air command and control system” (IACCS), which also links with civilian air traffic control radars.

S-400 system

The S-400 is designed as a stand-alone system, with its own radar, missiles, logistics and data networks. Therefore, each S-400 unit will provide an extra layer of protection to pre-designated high-value targets – e.g. the national capital, or Bhabha Atomic Research Centre.

However, the S-400 units will not operate autonomously, but will be quickly plugged into the IACCS. This will enhance surveillance and strike capabilities and also cross-verification of inputs across the system.

“We are old hands at networking systems from diverse sources, enabling them to inter-operate. We have done it with our AEWC&C system. On board our warships, weapons and sensors from many different countries operate seamlessly. The S-400 will fit smoothly into the IACCS,” says a senior IAF air marshal.

Each S-400 unit consists of a 91N6E Big Bird acquisition radar that detects targets, and a 55K6E command post that autonomously makes decisions relating to engagement. It would allocate each target to one of six 98Zh6E fire units, each having twelve “transporter-erector-launchers” (TELs), with four missiles on each TEL. Once a missile is launched, the fire unit’s 92N6E Grave Stone multimode engagement radar guides it to the target. Finally, each S-400 fire unit has a 30TS6E logistical support system with missile storage, test and maintenance equipment.

The entire S-400 unit is highly mobile, being carried by all-terrain, wheeled vehicles with autonomous power supply, navigation and geo-location systems, communications and life support equipment. Given that, it is ideally suited for safeguarding the mechanised units in army strike corps from enemy air attacks.

With the US trying to wean India’s military away from Russian equipment, media reports have speculated that Washington offered India its Theatre High Altitude Air Defence System (THAADS) as an alternative to the S-400. However, the THAADS is primarily an anti-ballistic missile system, whereas the S-400 is optimised as an anti-aircraft system.

Saturday, 6 October 2018

S-400 deal announced quietly after Doval’s opposition, Modi’s approval

Putin’s last minute intervention with Modi salvages $5.43 billion S-400 contract

By Ajai Shukla
Business Standard, 6th Oct 18

The low-key announcement on Friday of India’s $5.43 billion purchase of Russia’s S-400 air defence missile system contrasted sharply with the flourish with which Prime Minister Narendra Modi and then French President Francois Hollande announced their April 2015 agreement to supply India 36 Rafale fighters.

Meeting the press in New Delhi, Modi and Russian President Vladimir Putin avoided any mention of the S-400 during their comments to the media. Nor did the contract feature in an official Ministry of External Affairs (MEA) list of documents signed.

Eventually, India’s biggest overseas arms contract since the Rafale buy found official mention only through one brief sentence in the Indo-Russian Joint Statement, released by the MEA. 

The joint statement noted: “The sides [New Delhi and Moscow] welcomed the conclusion of the contract for the supply of the S-400 Long Range Surface to Air Missile System to India.”

Business Standardlearns it was not wrangling over the price that clouded the deal with uncertainty. Instead, top Indian government officials disagreed on whether to risk US ire by concluding a deal that Washington has made clear it disapproves of.

Sources close to the negotiations say that, while Defence Minister Nirmala Sitharaman has consistently backed the S-400 purchase, National Security Advisor (NSA) Ajit Doval – who is more alert to US signalling – wanted to postpone signing the contract.

On his visit to Washington in mid-September, Doval met top US officials, including Secretary of State Mike Pompeo, Defence Secretary James Mattis and his American counterpart, John Bolton. They are understood to have warned him that India’s purchase of the S-400 might trigger US sanctions under the “Countering America’s Adversaries Through Sanctions Act” (CAATSA).

CAATSA binds the US administration to impose sanctions against countries that engage in “significant transactions” with Russian, Iranian and North Korean defence and intelligence entities. To exempt close partners like India and Vietnam, the US Congress has legislated a waiver that the US president can invoke. However, Doval was told there is no guarantee that President Donald Trump would invoke the waiver for India.

Two days after returning from the US, Doval received a top level delegation from Rosoboronexport, Moscow’s defence exports agency, to tie up details of defence contracts to be signed during the Modi-Putin summit. Doval expressed his strong reservations about signing the S-400 contract, given the “current climate” – an apparent reference to the Rafale controversy, but which could have also meant pressure from Washington.

In the days leading up to Putin’s visit, Moscow remained in touch with Doval’s office to tie up the visit agenda. The NSA steadfastly maintained that neither the S-400 deal, nor the deal for four Krivak III-class frigates, would be signed during Putin’s visit.

As late as Thursday, when Putin landed in New Delhi on Thursday, the Russian side was told that no defence agreements would be signed during the summit. However, Putin raised the subject with Modi, both on Thursday night and in the Friday talks.

“Eventually, it was Modi who took the call on Friday morning to go ahead with the S-400 contract”, says an individual close to the decision-making.

Even so, the announcement was done without flourish. “It is hard to say whether the government is more worried about blowback from the US Congress, or from the Indian National Congress,” quipped a senior civil servant.

According to Russian language technical papers published by designers of the S-400, it is designed primarily as an air defence system with only limited capability to shoot down ballistic missiles. 

The designers of the S-400 Triumf (NATO designation SA-21 Growler) write it is built to shoot down aircraft at low and very low altitudes, even when stealth technology greatly reduced their target signatures. Its ability to track multiple targets caters for a crowded airspace with large numbers of aircraft, as well as drones. It is designed to defeat advanced electronic jammers and survive on a battlefield where the enemy is targeting the S-400 with precision guided munitions. The capability to engage tactical ballistic missiles and intermediate range ballistic missiles – the anti-ballistic missile (ABM) role – is mentioned at the end, almost as an afterthought.

Even though the first S-400 units might be deployed to protect Delhi – its long range allows it to cover the area up to the Indo-Pakistan border from deployment areas in the National Capital Territory – its primary mission will remain anti-aircraft protection. Guarding Delhi from ballistic missile attack will be the job of an ABM system the Defence R&D Organisation is currently developing and testing.

While the S-400 will be paid for from the air force budget, its vehicle-mounted configuration allows it to provide air defence cover to the army’s mechanised strike corps. It can also be fitted onto capital warships, like the Aegis system that guards US Navy warships.

Putin has travelled back to Russia on Friday evening, after attending the 19th India-Russia Annual Summit. The last summit was held in June 2017 in Russia.

Friday, 5 October 2018

Russia eyes $8 billion in defence deals: S-400, Krivak frigates and Kamov helicopters



By Ajai Shukla
Business Standard, 5th Oct 18

With American having displaced Russia over the preceding decade as India’s largest supplier of weaponry, the balance could be restored significantly in the summit meeting between Prime Minister Narendra Modi and Russian President Vladimir Putin in New Delhi on Friday.

Possible announcements relate to the supply of five S-400 Triumf air defence units for the Indian Air Force (IAF) for some $4.5 billion; four Krivak III-class frigates for the navy for about $2 billion, and a $1.5 billion contract to build 200 Kamov-226T light helicopters in Hindustan Aeronautics Ltd (HAL) with technology transferred from Russian Helicopters. 

If all this is finalised, Russia would benefit from about $8 billion worth of defence orders. This would be half of what America has won in a decade. 

Standing in the way of Indian purchases from Russia is an American law passed last year – “Countering America’s Adversaries Through Sanctions Act” (CAATSA).

Passed by the US Congress to force President Donald Trump’s hand against Russia, CAATSA binds the US administration to impose sanctions against countries that engage in “significant transactions” with Russian, Iranian and North Korean defence and intelligence entities. 

All three contracts in the pipeline with Russia – the S-400 system, frigates and, to a lesser extent, helicopters – could potentially be considered “significant transactions”.

However, after hectic Indian lobbying, Washington has created a path for its president to grant a waiver from CAATSA for close partners like India and Vietnam, which have traditionally been dependent on Russian weaponry, and cannot be reasonably expected to break that dependency suddenly.

It remains to be seen whether Trump will invoke a waiver for India. Defence Minister Nirmala Sitharaman indicated in August that there was a modus vivendi between New Delhi and Washington, stating: “Both the US secretary of defence and secretary of state have displayed understanding [of Indian interests].”

The S-400 Triumf (NATO designation: SA-21 Growler) is a versatile air defence system that can detect incoming enemy aircraft while they are 600 kilometres away and shoot them down as they approach within 400 kilometres. 

An S-400 unit located near Delhi for protecting the capital would be able to shoot down Pakistani aircraft even before they cross the border to India, and Chinese aircraft while they were still in Tibetan or Nepalese air space.

Similarly, an S-400 unit deployed to protect India’s petroleum refineries and dock infrastructure around Jamnagar, in Gujarat, would be able to engage Pakistani fighters as soon as they took off from Karachi.

Russia also markets the S-400 as a defence against incoming ballistic missiles, presumably nuclear-tipped. But experts assess the S-400 is effective only against short and medium range ballistic missiles, and ineffective against intermediate range and intercontinental ballistic missiles, which travel at far greater speeds.

Sitharaman says Russia will deliver the S-400 within four years of signing the contract. But Moscow sources say, given keen interest from countries like Turkey and China, such a delivery schedule requires India to sign a contract right away.

Krivak III frigates

The Indian Navy, which is short of warships and building capacity, is negotiating to buy four Krivak III-class frigates from Russia, to supplement six similar warships bought earlier.

Two of these 4,000-tonne warships are lying almost fully built in Yantar Shipyard in Kaliningrad, Russia. For those, New Delhi and Moscow have negotiated a price of under $1 billion. They could be delivered to India, as soon as they are fitted with Ukrainian Zorya gas turbine engines – which Ukraine refuses to supply Russia but has agreed to route via India.

However, agreement has remained stalled on the cost of building the remaining two frigates in Goa Shipyard Ltd (GSL), which India has mandated. Building in India, would add on costs such as technology transfer, transferring raw materials and systems from Russia to Goa, establishing building infrastructure in GSL and indigenising parts of the warship.

Kamov-226T choppers

In 2015, on Putin’s personal request, Modi agreed to buy 200 Kamov-226T utility helicopters for the IAF and army, without competitive bidding. 

HAL and Russian Helicopters have established a joint venture to build the Kamov in Tumkur. After supplying 60 choppers fully built from Russia, the Tumkur factory will build the other 140.

With manufacturing infrastructure established, Russian Helicopters would be in pole position for winning another billion dollar contract for 111 naval utility helicopters, which is already under procurement.