Posted by: John Elliott | September 11, 2008

America’s payback for India nuclear deal begins

It hasn’t taken long for India to publicise its intentions to reward the US for help in getting the nuclear deal between the two countries through the International Atomic Energy Authority (IAEA) and the 45-nation Nuclear Suppliers Group (NSG) in the past few weeks.

As the deal enters its final stage of gaining approval from the US Congress, India’s External Affairs Ministry has this afternoon issued a statement saying:

“Government is taking steps to realize commercial cooperation with foreign partners in this (civil nuclear) field.
We have informed the USA about our intent to source state of the art nuclear technologies and facilities based on the provisions of the 123 (India-US) Agreement from the US.
Government is also moving towards finalizing bilateral agreements with other friendly partner countries such as France and Russia.
While actual cooperation will commence after bilateral agreements like the 123 Agreement come into force, the Nuclear Power Corporation of India has already commenced a preliminary dialogue with US companies in this regard.”

The significance of that statement is not that India has started commercial nuclear talks with different countries but that it is already talking to US companies.

This is how it is going to be from now on with nuclear and defence deals. It is inconceivable that the US will not win any orders that it wants.

India’s defence minister A.J.Antony has been in Washington this week discussing orders and said US companies would have a “level playing field”, but the US’s Secretary of State Condoleezza Rice has made remarks indicating that she expects American companies to reap rewards.

Russia is currently India’s biggest defence supplier followed by Israel (which is reported to be about to receive India’s biggest ever defence joint venture order – worth $2.3bn – for Israel Aerospace Industries and Rafael to work with India’s DRDO research and development organisation on surface-to-air missile).

The US is determined that this will change. If an order that it wants is going elsewhere, it will surely step in to stop it with political pressure backed up by negative information and disinformation.

That has already happened on a $600m order for 196 Army helicopters that India cancelled last December, just as it was about to be placed with Eurocopter, part of EADS, the European defence company. The US was very miffed that the order was not going to Bell, part of Textron, and put intense pressure on India till the cancellation came through. The US spotted a flaw in the helicopter tests – Eurocopter had (stupidly it seems, with hindsight) sent a civilian and not a military craft for testing, but no-one worried at the time and it was a non-issue till the US made it one at the last minute. The US also made corruption allegations involving Indian agents – something that could be done on virtually every defence deal, but usually isn’t.

In the past, India refused to place defence orders with the US because of a fear that deliveries would be stopped if the US disagreed with Indian policies or military action.

That has gradually changed in the last couple of years and the US has secured some smaller orders for $960m Lockheed Martin (NYSE: LMT) Hercules military transport planes and a $50m amphibious warship. A $2bn order for eight Boeing (NYSE: BA) P-8i reconnaissance aircraft is being considered by India, and the US this week said it hopes to sell $170m Boeing Harpoon missiles.

But its biggest target is an order now pending for 126 multi-role fighter aircraft (MRCA) that Boeing and Lockheed are chasing with F-18s and F-16s. The competitors come from Russia, France, Europe (EADS), and Sweden, but it is inconceivable that the order will not go to the US. My guess is that the alternative is not for India to buy from someone else, but not to place the order at all.

The US cannot be quite so exclusive on nuclear orders – and it doesn’t need to be because there is a lot of nuclear work to spread around, with India expected to invest about $27bn in 18 to 20 new nuclear power plants over the next 15 years.

Russia is currently building two 1,000 megawatt reactors at Kudankulam in Tamil Nadu as part of a deal signed in 1988. Reuters reported this afternoon that Indian officials say the two countries would begin discussions on a multi-billion dollar deal to build four more nuclear reactors in Kudankulam – a deal that has been delayed till now because of the international nuclear restrictions on India.

But the US will make sure that its companies – especially GE (NYSE: GE) and Westinghouse Electric (even though it is owned by Toshiba of Japan) win orders.

That is the reality after the nuclear deal goes through. Does the US ever do anything internationally that (apart from securing oil) does not yield jobs and profits for US companies?


  1. […] America’s payback for India nuclear deal begins  Sept 11, 2008 […]

  2. Why the US? No one ever does anything that does not yield some dividends to him.

    I can already see India’s communists crying hoarse that India has sold out to the US the moment the F-16/18 deal is signed. As long as there is fair quid pro quo and the US does not attempt to ride rough over Indian sensibilities, this new relationship being forged between the two countries can make a significant contribution globally in general and in Asia in particular.

    In a rapidly changing world, the US needs India as much as, if not more than, India needs the US. As long that is understood, this should be a marriage that will not head to splits ville any time soon.

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