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From barter to partner in the Russia–India arms trade

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Russian President Vladimir Putin visits Zvezda shipyard during a meeting with Indian Prime Minister Narendra Modi ahead of the Eastern Economic Forum in Vladivostok, Russia, 4 September 2019 (Photo: Alexander Nemenov/Pool via Reuters).

In Brief

In the last week of March 2020, Dmitry Shugayev of the Russian Federal Service for Military and Technical Cooperation revealed that India would purchase 400 T-90S tanks, along with a number of MiG-29 fighter jets. While Russian arms exports to India have seen a decline of 47 per cent in 2019, new orders might change the scenario in 2020.


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India’s demand for foreign technology is transforming its relations with arms exporting nations. Prime Minister Narendra Modi wants to indigenise defence production and establish joint ventures with foreign defence manufacturers through his ‘Make in India’ initiative. Alongside changes to India’s arms trade with Russia, this is designed to attract foreign direct investment in defence production.

Instead of seeking licenses to produce arms — where the importer purchases the rights to manufacture all or part of a weapons system — the stress now is more on the transfer of technology. This involves evaluating the life cycle costs of a weapons system from training to software and spare parts before any purchase is made. A feasible joint venture program with a foreign nation or firm can then be worked out.

Sensing change in one of the world’s largest defence markets, Russia is now pitching joint ventures, collaborative R&D programs and even offering to produce state of the art weapons in India itself.

During the 1970s the weapons trade between India and the Soviet Union was conducted through a barter system. The disintegration of the Soviet Union was an eye opener for the Indian establishment — it struggled to obtain spare parts and equipment from factories suddenly located in Eastern European countries.

As a result the Indian defence establishment went scouting for alternatives and found Israel the best source of spare parts and advanced equipment. US arms exports could not find markets in India from 1990 through to 2000. Indian policymakers were hesitant to rely on US weapons with stringent end user agreements — and Indian armed forces personnel had adapted to Soviet-era weapons.

In the meantime, India embarked on developing its own naval platforms and other advanced weaponry through its defence research establishments. But the success rate in devising new products was stunted by US sanctions following India’s 1998 nuclear tests.

The slow-down in Russian imports over the last decade and the lack of accompanying technology transfers are forcing the two countries to look at other possible options for retaining their arms trade.

It was proposed that the two countries undertake joint projects such as Brahmos (a medium-range cruise missile that can be launched from air, sea and land), licensed production of aircrafts such as the Sukhoi-30MKI, and structural support for maintenance and other service requirements. These proposals underline four changes in the post-2010 phase of the Russia–India defence relationship.

First, it is more commercial and active in nature. This is manifested in the negotiations for the procurement of the Admiral Gorshkov-class frigate now known as Vikramaditya.

Second, there are now joint venture projects such as Brahmos where the two countries have worked together to build a state-of-the-art system with sophisticated radar evasion and low flying capability.

Third, under the ‘Make in India’ program, Russia has been invited to manufacture weapons systems in India. The possibility of manufacturing 200 of the Kamov KA-226 light helicopters with Indian manufacturer Reliance Defence was proposed in 2018, but the insolvency of the Indian company puts the project under doubt.

India has commissioned low-value projects with Indian private defence manufacturers such as L&T, Mahindra, Tata and many others. But the problem with international joint ventures between private firms is that they need confirmed orders for longer periods of time. Foreign firms have also sought the relaxation of India’s offset policy — which mandates foreign companies spend at least 30 per cent of the contract value in India — for any given defence purchase.

Finally, Russia and India are exploring opportunities for joint defence exports manufactured in India and sold to a third country. The major hindrance to this initiative is agreeing on a common end user agreement and the finalisation of India’s defence exports policy.

The publicly-owned Ordnance Factory Board is the largest producer of defence-manufacturing equipment in the country and is at the forefront of Indian defence exports. Despite functioning under the Indian Ministry of Defence, it too is restrained by the government’s vague defence export policy that encourages exports to ‘friendly countries’ only.

Joint ventures between Indian public sector units and private manufacturers in defence are also struggling to take off because of issues related to confidentiality.

The new era of arms trade between India and Russia envisages the eventual sale of the S-400 missile defence system to India despite US sanctions against Russia under the Countering America’s Adversaries Through Sanctions Act (CATSAA). But the S-400 is only one aspect of India’s diversification of its defence inventory and systems.

India needs technologically superior weapons systems and to this end is setting new terms of trade with its long-time friend Russia. But Modi’s ‘Make in India’ initiative is aimed at the bigger goal of attracting enough technology transfer and investment to build up India’s own arms production.

Pankaj K Jha is Associate Professor at the Jindal School of International Affairs, OP Jindal Global University. He was Director of Research at the Indian Council of World Affairs from 2014–2017 and Deputy Director of India’s National Security Council Secretariat from 2012 to 2013.

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