INDIA AND RUSSIA HAGGLE OVER PRICES FOR TANKS, FIGHTER JETS.

Reports published in recent weeks suggest that Russia and India are still struggling to finalize the details of two major arms deals which both sides had hoped would be ready for signing during President Vladimir Putin’s planned October visit to New Delhi. The deals, involving the sale by Russia to India of both MiG-29K fighters and T-90 battle tanks, are part of a broader military-technical cooperation package between the two countries which could bring millions of dollars in much needed additional revenues to Russia’s struggling defense complex. India and China combined now buy roughly 70 percent of all Russian military hardware peddled abroad. India itself is estimated to have purchased approximately US$3.5 billion worth of Russian weaponry between 1990 and 1996, and reports indicate that sales now amount to about US$1 billion per year (IPS, February 4; Izvestia, August 4). The stakes are therefore high for both countries in the ongoing negotiations over the MiG-29Ks and T-90 tanks. The fact that the deals were not finalized during Indian Defense Minister George Fernandes’ highly publicized June visit to Moscow suggests that some tensions remain between the two countries in this area, despite a series of recent statements by Russian and Indian officials reflecting their hopes that they are on the threshold of a new era of enhanced cooperation and friendship (see the Monitor, July 5).

The main point of contention with regard to both the fighter jet and the tank sales apparently relates to pricing. According to an Itar-Tass report out of New Delhi on July 30, Indian officials had indicated their government’s readiness to buy at least twenty-two of the MiG-29Ks at a price of about US$1.8 billion, and possibly to purchase additional planes of a similar type as well. An Indian military spokesman was quoted in the same report, however, as saying that New Delhi in fact believes that the price the Russians are asking for the MiGs is too high. “We have no problems with the technical aspects of the planes or other military equipment, but our political compulsions to give in to Russia have changed,” he was quoted as saying. “We want a realistic price reflecting the proper rupee-ruble conversion rate” (AFP, July 31).

The story appears to be much the same in the negotiations over the 310 main battle tanks which Russia is to deliver to India. According to unnamed Russian military diplomatic sources, tough bargaining by the Indian government over the price of the tanks has thus far proved the main stumbling block to a final agreement. The same sources say that Russia is demanding US$2.12 million per tank for the T-90s, while India is offering only US$2 billion. In addition, the two sides have apparently not been able to resolve all of their differences over the arrangement by which Russia will hand over the assembly technology for 210 of the T-90s, which are to be assembled under Russian license by India at its Avadi factory in Tamil Madu. The remaining 100 tanks are to be supplied directly to India by Russia’s Uralvagonzavod State Production Association in Nizhny Tagil (UPI, August 2; Times of India, August 3).

While sources suggested that the issues involved in the arms sale negotiations were not serious and that the two sides were likely to resolve their differences before or during Putin’s October visit, they do reflect a complex of problems which have dogged the negotiations since their inception. One aspect of those problems was Moscow’s apparent failure to keep its own defense dealers in line or to ensure a unified sales pitch to New Delhi. With regard to the tanks, for example, two of Russia’s state arms export companies–Rosvooruzhenie and Promeksport–reportedly wound up competing against each other for the Indian contract. Rosvooruzhenie, Russia’s largest arms trading company, was pushing the T-90s, while Promeksport, which works with the Russian Defense Ministry, was pitching the older and more well-established T-72 main battle tank. Among other things, Promeksport officials reportedly went so far as to reveal to journalists confidential documents criticizing the performance of the T-90s and touting the T-72s (The Defense Journal [Pakistan], April 1999).

Russia’s two main military aircraft companies have likewise reportedly been in intense competition to win the Indian contract for carrier-born fighters. A Russian newspaper paper report last November, for example, claimed that the Russian General Staff was backing a somewhat surreptitious effort by the Sukhoi group to push its Su-33 fighter onto New Delhi, despite the fact that Indian military officials preferred the smaller and lighter MiG-29K. The Russian General Staff was apparently hoping to stabilize the financial situation of Sukhoi, which supplies Su-33s for Russia’s lone aircraft carrier. The competition between the two Russian aircraft makers can hardly have helped either in their bargaining over prices with New Delhi, and the more general confusion may be one reason why negotiations over the fighter deal have dragged on for three years (Vedomosti, November 5).

Another set of problems related to the negotiations involves Moscow’s overwhelming reliance on arms sales to India and China. This reliance makes Moscow dependent on those countries to some extent and permits their governments to bargain harder than if Russia had a more diversified client base. And that dependence is probably not related solely to pricing. As rising economic and regional powers, both India and China are looking not only for arms off the shelf, but also–and especially–for access to military technologies which will permit them to increase their own arms manufacturing capabilities. This is a potentially disturbing development for Moscow over the longer term. India, moreover, has some additional leverage over Moscow insofar as New Delhi’s growing economic clout has allowed it also to look elsewhere–including to Europe–for military suppliers. For all of that, though, it appears that India and Russia are on the verge of finalizing a lucrative package of new arms deals, and that neither New Delhi or Moscow is likely to let differences in this area get in the way of their October summit meeting.

VOLGA BOATMEN’S SONG.