Sunday, February 12, 2012

The $20 Billion Dogfight for an Indian Air Force Contract...

The $20 Billion Dogfight for an Indian Air Force Contract...

It flies at over 1,500 miles per hour and has been called the complete combat aircraft.

But India doesn’t want it.

The consortium behind the Eurofighter, Typhoon, was ready for take off last month on an air defense contract worth $20 billion.

That was until French company, Dassault, swooped in and beat them to it, winning the chance to sell 126 of their Rafale aircrafts.

But the consortium – made up of the German and Spanish branches of EADS, Britain’s BAE Systems, and Italy’s Finmeccanica – haven’t yet had their hopes grounded.

This week, BAE’s CEO, Ian King, said “all options are still on the table,” suggesting the price for the Eurofighter contract may come down.

IHS Jane’s consultant, Endre Lunde, says France may still have the edge, with the transfer of nuclear technology between them and India perhaps the most crucial part of the deal:

“France, with its experience in this field, could be very important to them in terms of helping to develop that technology, developing that capability and not least building this in India. So both on a civilian side and a defense side, I think there’s significant potential to develop the relationship between India and France further.”

Precedent is not on the French side however.

The Rafale has lost a series of contests to U.S. competition, while in 2009 French President Nicolas Sarkozy prematurely announced that a sale of Rafales to Brazil was imminent, only to see talks drag on for another two years. Lunde says:

“France has been close before and it hasn’t turned out in the end, one example being the UAE, which was predicted to be a customer of the Rafale. That fell through and it’s now in negotiations with the Eurofighter.”

So although the French may have India’s fighter contract in its sights, the dogfight over who will ultimately prevail WILL produce more twists....

India plays fighter catch-up...
By Siddharth Srivastava

NEW DELHI - After over a decade of waiting, India has decided in the "mother" of defense deals, with France's Dassault Rafale fighter jets winning the multi-billion contract for 126 MMRCA (medium multi-role combat aircraft).

The value of the contract could be anywhere between US$12 billion and $16 billion, though some estimates have pegged it at much larger $20 billion. It is clear that this is one of the world's largest military aviation deals.

Welcoming the deal, French President Nicolas Sarkozy termed the deal "a vote of confidence in the entire French economy".

Indian defense deals are notorious for delays, corruption, indecision and red tape. However, a near emergency situation due to the country's depleted and outdated airstrike capabilities and potential security threats from neighbors had forced New Delhi to act on the matter.

The contract is the first foreign deal for Dassault's Rafale fighter jets and is a major fillip to the French arms industry. India's decision could win Dassault more contracts, with the United Arab Emirates a potential customer. An offset component in the deal ensures that part of the money will be re-invested in India's defense industry.

In its latter stages, competition for the fighter contract had become a race between the Eurofighter Typhoon and the Rafale, with the latter winning after an exacting technical and commercial negotiation process. Recent successes in operations in Libya and Afghanistan also played a part in tilting the deal to the French jet.

It was also not lost on anybody that the Congress-led New Delhi government, facing major allegations of corruption, has settled for the cheapest aircraft. It's estimated that the Typhoon would have cost some $5 billion more.

Eighteen fighter aircraft will now be delivered to India over the next three years, while the remaining 108 will be indigenously built by state-owned Hindustan Aeronautics Ltd via technology transfer.

After a bruising contest that also saw heavy doses of diplomatic pressure, Russia's MiG-35, Sweden's Saab Gripen, the American Boeing F/A-18 and the Lockheed Martin F-16 were rejected on "technical and operational" grounds.

There were several reports than an unhappy Washington was pushing New Delhi to re-consider the US aircraft. The final choice was, however, widely anticipated this month as funds were allotted in the annual budget (year ending March 2012) for the contract.

India has been looking to build a fighter jet fleet that will replace its crash-prone Russian MiG-21 interceptors and fill a gap between the long-range Russian Sukhoi-30s and lightweight indigenous Tejas LCA fighters.

While the Sukhois are a strategic guard against China, the Rafales are more aimed at Pakistan. The Rafale contract forms part of India's estimated $100 billion import-driven defense modernization exercise spread over a decade that comprises submarines, tanks, missiles, aircraft carriers, advanced radars, artillery guns and more.

According to the Swedish think-tank the Stockholm International Peace Research Institute, India was the world's biggest importer of arms between 2006 and 2010, accounting for 9% the global arms trade in the period.

Pakistan and China, two countries with which India has fought wars, are just as focused on military modernization. Pakistan continues to receive military aid from the United States as a partner in the global "war against terror", though India has for long held that such stockpiling of weapons only adds to instability in the region.

New Delhi feels that US-supplied armaments to Pakistan are more potent against a conventional enemy rather than against the amorphous terror networks that also spread over Afghanistan and need effective intelligence and pin-pointed operations, such as the one that killed Osama Bin Laden, to neutralize.

Pakistan's military, meanwhile, continues to be supported by Beijing through ballistic missiles that could destroy Indian cities.

China's military prowess is far ahead of India's. The country has managed to copy Western arms prototypes to build-up an effective domestic armament manufacturing capability that has reduced its dependence on arms imports. Given the closed nature of China's polity, nobody is quite sure about the level of investment and technical development in China's defense sphere.

Given such a scenario, India has no choice but to try and build an effective deterrent against China while matching the military capabilities of Pakistan, against whom the security threats are more immediate.

India is also making a conscious effort to move away from dependence on imports from Russia to countries such as Israel and the US, apart from deepening ties with traditional partners such as France, Sweden and Britain.

The Russian defense industry is seen as increasingly outdated in the absence of effective state support. Existing Russian defense platforms in India's possession are depleted due to lack of spare parts and post-sale maintenance. Despite the French fighter deal, India has already signed multi-billion dollar defense contracts with the US for transport and reconnaissance aircraft.

India’s Foreign Minister S.M. Krishna was in Beijing this week, inaugurating his nation’s new $10 million embassy and meeting with his Chinese counterpart as well as a range of high-ranking Communist Party officials. The biggest headline to emerge from the visit was invariably about the two countries’ commitment to reach $100 billion in bilateral trade by 2015. Sino-Indian summitry is notorious for its tiresome platitudespeak, full of stiff statements promising respect for the other’s sovereignty and even stiffer appeals to friendship and bonhomie between the two Asian giants. This is understandable. Presiding over vast, intensely nationalist publics, both governments need to tread lightly in order to stave off conflict. But there are reasons to expect a hardening of the geopolitical divide, despite Beijing’s and New Delhi’s talking points.

Read more

India upgrades its military with China in mind -- Newsday/AP
India Upgrades Military to Match China -- Time/AP
India relying on Russia for arms -- Russia & India Report
Old weapons, new threats fuel India's military build-up -- AFP
India military build up: too little too late? -- Express India
An India-China Military Conflict? – Analysis -- Eurasia Review

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