WSJ, Dec 21, 2010
http://online.wsj.com/article/SB10001424052748703886904576031351139805830.html
Excerpts:
NEW DELHI—Russian President Dmitry Medvedev arrives Tuesday in India on a two-day trip aimed at solidifying Moscow's role as New Delhi's largest arms supplier in the face of increased competition from the U.S. and Europe.
Mr. Medvedev is the fifth and final leader of a member nation of the United Nations Security Council to visit India in 2010, underscoring New Delhi's rising importance as a global political and economic power.
India's fast-expanding economy and growing military budget offers Russia enormous potential to increase sales of military equipment. A U.S.-India nuclear deal in 2008, which paved they way for civilian nuclear exports to India, also has opened the door for Russia to sell civilian nuclear technology to New Delhi.
New Delhi, meanwhile, is hoping Moscow will allow Indian oil and gas companies a larger role in developing Russian energy assets. India is a net importer of crude oil.
Russia and India will sign agreements in defense, economic and space sectors during Mr. Medvedev's visit, Indian officials said, without giving details.
India is one of Russia's largest customers for military equipment, accounting for a third of the sector's exports—a legacy of the Cold War when New Delhi sided with Moscow against Beijing. About three-quarters of India's current military hardware is of Russian origin.
But in recent years, India has begun courting other suppliers of military hardware from the U.S., France and the U.K., all of whose leaders have used visits here this year to clinch deals.
"Russia's defense industry is not as capable as it used to be during the Cold War," said Laxman Kumar Behera, an expert on India's military at the New Delhi-based Institute for Defense Studies and Analyses. "India is trying to diversify its supply sources."
The U.S., during a visit to India by President Barack Obama in November, announced a $4 billion deal for Boeing Co. to supply the Indian air force with 10 C-17 Globemaster III military transport aircraft.
In July, U.K. Prime Minister David Cameron used a trip to the country to announce a $1.1 billion deal to supply 57 Hawk trainer jets.
French President Nicolas Sarkozy visited India in December, during which the two nations signed a deal for France to supply two nuclear reactors valued at $9 billion.
Mr. Sarkozy also lobbied for France to win an $11 billion deal to supply 126 fourth-generation fighter jets to India's air force. Moscow is competing for that deal, which New Delhi is scheduled to award next year.
Russia wants India to chose the MiG-35 fighter, made by RSK MiG, but has to compete against a number of other suppliers including U.S.'s Boeing and Lockheed Martin Corp., France's Dassault Aviation, and a consortium of European bidders.
To boost its chances next year, Russia has been emphasizing how it is jointly developing military equipment with India.
Both nations are planning to build a fifth-generation fighter aircraft, which could be valued at tens of billions of dollars, but is unlikely to enter production until 2020. Indian media have reported one of the deals likely to be signed this week could include details of this joint production.
"Russia and India have moved to a new level of cooperation in the military-technology area, from the relationship of buyer-seller to joint development and production of modern weapons," Russian Defense Minister Anatoly Serdyukov said in late 2009 after a regular meeting of an intergovernmental commission.
But Russia also has disappointed India on some orders. An aircraft carrier, due for delivery in 2008, has been delayed until 2012, while the cost has doubled to $2 billion. Spare parts for Russian planes also have been hard to come by.
Russia—like the U.S., U.K. and France—also is keen to help India develop its civilian nuclear industry to meet growing power needs.
Russia and India in December 2009 signed a civilian nuclear-cooperation agreement, much like the U.S.-India deal. Moscow already is helping to construct two power plants in India's southern Tamil Nadu state, which are nearing completion.
The stakes are high for Moscow, whose trade with India is skewed toward military sales. While other countries, notably China, have tapped in to India's booming economy, selling a range of manufactured goods from power equipment to telecoms hardware, Russia's trade has remained relatively small.
Russia's two-way trade with India in the year ended March 31 stood at $4.6 billion, a decline of 16% over the previous year, and only about a tenth of China's bilateral trade.
Chinese Premier Wen Jiabao spent three days in New Delhi last week, during which India and China agreed to boost trade to $100 billion by 2015.
Still, India continues to see Russia as an important counterweight to China, says Naresh Chandra, chairman of the National Security Advisory Board, which advises India's prime minister on security matters.
[...]
India and Russia have targeted to grow bilateral trade to $20 billion by 2015, of which military sales to India will play an important role.
New Delhi is planning to spend $32 billion on the military in the current fiscal year, almost double the amount five years ago, as it modernizes its armed forces as a deterrent to Pakistan and China.
India is hoping greater access to Russia's oil and gas fields will reduce its dependence on imported energy. India's state-run Oil and Natural Gas Corp. said this month it is in talks to take part in the development of Russia's massive Trebs and Titov oil and gas in northwest Russia.
ONGC already has a 20% stake in a consortium led by Exxon Mobil Corp. which is developing Russia's Sakhalin-1 oil and gas field.
—Gregory L. White in Moscow contributed to this article.