The Traditional Friend: Russia-India Military-Technical Cooperation and Defense Procurement Ties Post-DPP-2013
October 28, 2013
By Oliver Backes
With India instituting new policies to diversify its suppliers of defense materiel, it will naturally be difficult for Russian firms to maintain their dominant position in Indian defense procurement. However, Russia will remain the dominant foreign player in Indian defense procurement due to numerous competitive advantages.
Moscow’s arms exports and defense industry ties with India are unmatched in either size or scope. Over the past ten years, Russia’s defense industry has exported 21.3 billion dollars’ worth of materiel to India (accounting for 31 percent of Russian defense exports), a figure matched only by defense exports to China (19.8 billion dollars – 29 percent) – though exports to China have fallen in recent years, just as those to India have risen. (All statistics on arms transfers are taken from the SIPRI Arms Transfer Database). That 21.3 billion dollars accounted for over 75 percent of defense imports on the Indian side. No other exporting country accounted for more than 5 percent of imports during that same period. Naturally, it will be difficult for Russian firms to maintain such a dominant position moving forward. As is evident from recent tenders granted to non-Russian providers, India is trying to diversify its suppliers. But such a loss of market share should not be seen as indicative of the future of Russia-India defense ties, as Russia will remain the dominant foreign player in Indian defense procurement.
While some analysts expect India’s Defense Procurement Procedure (DPP) 2013--which aims to develop a competitive, indigenous defense sector--to further complicate Russia’s standing in the Indian defense market, the view from Moscow is actually not so bleak. Historically, India has depended on the direct purchase of foreign defense materiel, often without concessions to indigenization efforts. DPP 2013 explicitly relegates this “Buy (Global)” option to the status of last resort and favors procurement bids that can contribute to the indigenization push. DPP 2013 will prioritize joint ventures and other arrangements that involve joint research and development, domestic production, and technology transfer. If implemented successfully, the result will be a more competitive procurement process for foreign firms selling arms to India.
Russia will likely remain the major player in this new environment. Traditionally, the Soviet Union and later Russia had a pure patron-client relationship with India in defense. To a degree, that relationship remains intact today. Yet, while a great deal of Russia’s defense exports to India were of the “Buy (Global)” variety, Russia also has a number of high-profile joint research, development, production, and technology sharing projects – exactly the type that India now covets. Combined with the trust developed with the Indian government and Indian companies, these agreements should translate to a competitive advantage.
A perfect example is the Sukhoi/HAL Fifth Generation Fighter Aircraft /Perspective Multi-Role Fighter (FGFA/PMF) project, the crown jewel of the Russia-India defense partnership. The project is designed in part to boost Indian domestic defense industrial capacity. In the preliminary design phase, Sukhoi and HAL have worked jointly to develop the fighter through expert exchanges, training for Indian professionals and specialists, and technological cooperation. During the project, India’s work-share will amount to 30 percent with a focus on “composite components and high-end electronics.” With Russian assistance and using Russian military technology, an Indian version will be produced in Indian factories with plans to produce an export variant beginning in 2020.
The FGFA/PMF project highlights Moscow’s willingness to adapt to Delhi’s indigenization drive. In this joint venture, the Kremlin agreed to share top-secret, proprietary military technology with a foreign government, something Russia had never done before. According to a senior HAL official, the decrees authorizing the sharing of such sensitive technology were approved at the highest levels in the Kremlin. Russian envoys in India consistently espouse strong support for continued transfer of technology as an integral part of the defense relationship. This is evidenced by another major joint project, the development and production of the BrahMos supersonic cruise missile. While Russian officials may be exaggerating their willingness to engage in technology transfer across the whole range of military technology, Moscow’s demonstrated flexibility in adapting to the new procurement environment in India (a market that Moscow considers a top priority) represents a competitive advantage.
That is not to say that there are no signs of discord on the horizon. The Indians have concerns about both the quality of Russian arms and Moscow’s capacity to supply spare parts. Concerns about a closer Russia-Pakistan relationship, while unlikely to include arms supply (a point the Kremlin emphasizes), could hamper defense cooperation. Even the FGFA/PMF project has faced some difficulties. A two-year delay announced in mid-2012 was certainly a setback; however, Indians working on the project reportedly remained optimistic and cited the “invaluable experience” gained. More recently, the final design contract has been pushed back due to an increase in cost. Even with this setback, however, India remains committed to the project, rejecting U.S. offers for similar joint FGFA projects. Cost overruns have cropped up in most other major projects, including the refurbishment of the INS Vikramaditya/Admiral Gorshakov aircraft carrier. While the above issues remain of concern to India, the benefits accrued through deep cooperation with Russia in the defense industry are likely to balance such concerns – especially given the focus on indigenization – as evidenced by the experience of the FGFA.
The political aspects of cooperation are another reason for optimism. Defense procurement and military-technical collaboration are by far the largest and most critical areas of economic cooperation between Moscow and Delhi, ones that both sides prioritize. These ties are a manifestation of a mutual commitment to bilateral cooperation underpinned by historical experience during which the Soviet Union and later Russia was a politically reliable and consistent supporter of India’s rise. Additionally, geopolitical considerations have pushed the two states towards deeper partnership in defense. Moscow and Delhi share a healthy mutual concern about China’s growing strength and the threat of regional instability and extremism in their shared backyard of Central Eurasia. Additionally, as fellow BRICS states, Moscow and Delhi actively support the reorientation of the international system towards greater polycentricism. President Putin has stated that the Russia-India relationship is an “an example of responsible leadership and collective actions” in a changing world and he often references the convergence of views on the major international issues listed above. Strategic cooperation in defense procurement and arms supply underpins this growing partnership. Rajeev Sharma, an Indian commentator, views Russia’s track record of unwavering support to India as the primary reason why Delhi will continue to prioritize Moscow as a defense partner.
Russia remains in an enviable position. DPP 2013 is tailored to the types of joint ventures in which Russian companies are currently engaged. There is political will from both sides to maintain close defense ties as part of a larger strategic partnership, as Indian Prime Minister Manmohan Singh noted when he said that the future Russian-Indian defense partnership “must be increasingly based on technology transfer, joint ventures and co-development and co-production.” Existing personal and business ties should grease the proverbial wheels. Even a recent joint defense declaration between the United States and India, which upgrades engagement to (according to one Indian publication) “replicate” Russia in joint development, will not limit India-Russia ties, according to External Affairs Minister Salman Kurshid. He stated that “everybody knows that we have to diversify and expand. But we do not do this at the cost of [a] traditional friend of ours. [Indo-Russian cooperation is] not going to be affected." While India will no doubt look to new partners, it is too early to proclaim an end to Russia’s privileged position.