US embassy cable - 05NEWDELHI3810

C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 003810 
 
SIPDIS 
 
E.O. 12958: DECL: 05/16/2015 
TAGS: PREL, ENRG, ETRD, KNNP, TSPA, RS, CH, IN, India-Russia 
SUBJECT: PUTIN: "MANY GUESTS IN MOSCOW, BUT ONLY ONE INDIA" 
 
REF: A. NEW DELHI 5978 
 
     B. NEW DELHI 3652 
     C. NEW DELHI 3653 
     D. NEW DELHI 7733 
 
Classified By: Charge Robert O. Blake, Jr., for Reasons 1.4 (B, D) 
 
1.  (C) Summary: According to our Indian contacts, President 
Putin offered India a range of defense and energy cooperation 
proposals during PM Manmohan Singh's May 8-10 visit to 
Moscow, renewing top-level bonhomie after his scratchy visit 
to New Delhi last December.  Commenting on Putin's offer to 
look into India's request for four additional nuclear 
reactors and nuclear fuel, jointly produce MIG-29s, begin a 
Joint Working Group for economic cooperation, and discuss 
high-tech cooperation on a global navigation system, NSA MK 
Narayanan called the visit "far more productive than 
anticipated."  The bulk of the Russia-India relationship 
continues to gravitate around defense and energy cooperation, 
but the former remains bogged down in details over 
Intellectual Property Rights (IPR) while the latter continues 
to face obstacles over Nuclear Supplier Group (NSG) 
restrictions.  India-Russia dialogue is set to continue when 
President Kalam visits Russia at the end of May and at the 
first ever stand alone meeting between the Foreign Ministers 
of India, Russia and China on June 2 in Vladivostok.  By 
playing such close attention to the PM at a time when the 
leaders of 53 other countries were also in Moscow, Putin 
appeared to signal that he does not want to let India's 
growing ties with the US and other partners overtake old 
fraternal relations with Moscow -- but the reality is that 
others are catching up.  End Summary. 
 
Priority on Nuclear Energy 
-------------------------- 
 
2.  (U) With energy a major focus of the meeting, the Indian 
PM reportedly emphasized New Delhi's request for expanded 
nuclear cooperation and assured Putin that the GOI would soon 
pass export control legislation to address proliferation 
concerns.  According to press summaries of his meeting, India 
would like four additional 1000 mega-watt nuclear reactors 
for its Koodankulam nuclear power station and more enriched 
uranium for its US-built Tarapur reactors.  (Note: Putin 
rebuffed the Tarapur fuel request in December 2004, citing 
NSG restrictions.  Russia is currently assisting with two 
such nuclear reactors, made possible because the agreement 
was signed in 1989 before Russia joined the NSG in 1992. 
These reactors are two of the five Indian facilities under 
IAEA safeguards (Ref A). End Note). 
 
3. (C) Stressing India's role as a responsible nuclear power, 
the PM briefed Putin on a major piece of export control 
legislation that was before Parliament.  Singh asserted that 
the "Weapons of Mass Destruction and their Delivery Systems" 
legislation (Ref B), subsequently passed on May 13, would 
increase international confidence in India's export controls, 
thus paving the way for greater nuclear cooperation. 
According to the Tribune News Service, NSA Narayanan 
speculated that "concrete results encompassing cooperation in 
nuclear energy are expected soon." 
 
4.  (C) One week after the PM-Putin meeting, Foreign 
Secretary Saran told the Charge that although the Russian 
 
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president made no commitment, he agreed to review proposals 
for nuclear cooperation and promised to give the matter his 
"individual attention" (Ref C).  While pessimistic about the 
chances that additional Russian reactors could be supplied 
under current restrictions, Dr. Nandan Unnikrishnan, a 
Russian expert from the Observer Research Foundation (ORF) 
attributed this changed Russian position in part to the 
civil-nuclear dimension in recent US initiatives and observed 
that "having the Americans in the nuclear market has given 
the GOI room to negotiate." 
 
5.  (C) Energy is also likely to figure at a meeting of the 
Foreign Ministers of India, China and Russia on June 2 in 
Vladivostok, a trilateral idea Moscow initially proposed in 
1998.  Briefing the press on his way home from Russia, the PM 
stated that "There are immense possibilities of cooperation." 
 A major motive for this meeting, ORF's Unnikrishnan 
asserted, is the fact that India and China are the world's 
most quickly growing energy consumers, an area where Russia 
is a key player. Therefore, he added, it is in their mutual 
interest to avoid competing over Russian energy, which would 
lead to higher prices in both countries. 
 
Defense Cooperation and Continuing IPR Problems 
--------------------------------------------- -- 
 
6.  (C) Emphasizing to the PM that "Russia has always stood 
by India and will always stand by India," Putin reportedly 
pushed his offer for joint production of the MIG-29, 
presumably to counter the US offer to co-produce F-16 or 
F-18s with India.  He dropped a key clause on retroactivity 
from the IPR agreement, which the two sides have been unable 
to agree on after Putin first offered India "a role" in 
producing MIG-29s during his December 2004 visit (Ref D) and 
which India would not accept.  Dr. Anuradha Mitra Chenoy, a 
Russian studies professor at Jawaharlal Nehru University 
(JNU), told Poloff recently that the US offer "might have 
pushed it" (the Russian offer), but recalled that India and 
Russia have a history of coproduction, including T-72 and 
T-90 tanks, the SU-30 fighter aircraft and most recently, the 
BrahMos cruise missiles.  Sixty to seventy percent of Indian 
military hardware still comes from Russia, she added, 
although India complains about delays in production, lack of 
spare parts and the difficulties of servicing broken 
equipment.  Russia made the offer because it "doesn't want to 
miss out" on the defense deals, she speculated.  MEA Joint 
Secretary (Americas) S. Jaishankar likewise indicated to 
 
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PolCouns that New Delhi saw the US multi-role combat aircraft 
offer as a key driver of the Russian's new MIG-29 proposal. 
 
GOI Resists Restrictions on Third Party Equipment 
--------------------------------------------- ---- 
 
7.  (C) When Putin dropped the remaining retroactive clause 
obstacle to the IPR agreement, Indian Ambassador to Russia 
Kanwal Sibal reportedly concluded that Russia had "broadly 
agreed to a draft agreement".  He asserted that it would be 
signed shortly and "significantly upgrade the level of 
defense collaboration."  Sujan Dutta, who covers military 
affairs for the "Telegraph", told Poloff that one week later, 
the draft was returned to India for stronger protection in 
the areas of co-production arrangements and third party 
upgrades.  According to Dutta, the first part of the 
agreement gives Russia veto power over any other Indian 
company that makes parts for the co-produced military 
hardware.  Dutta suggested to PolOff that this could limit 
India to buying spares only from Russia.  The second clause 
restricts India from upgrading Russian hardware with third 
party equipment without Russian approval.  Russia is 
apparently concerned about Israeli upgrades to their hardware 
and the resulting loss in market share.  According to the 
"Hindustan Times", the GOI has called this "restrictive," 
while Moscow says this agreement is a precondition for all 
future deals. 
 
8.  (C) ORF's Unnikrishnan pointed out that India used to 
sign IPR agreements with Russia on a contract-by-contract 
basis and have signed previous IPR agreements with the US, 
leading him to conclude that India will eventually sign one 
with Moscow.  Calling this issue "teething problems" for an 
emerging global power, Unnikrishnan predicted that the 
signing would likely take place during Manmohan Singh's next 
state visit to Moscow, expected in November. 
 
Restoring Economic and Technology Ties 
-------------------------------------- 
 
9.  (U) In an attempt to revive the economic and trade 
relationship, the leaders set up a Joint Working Group (JWG) 
to discuss banking issues and measures to increase trade. 
NSA Narayanan reportedly said that the JWG was set up because 
"economic relations do not mirror Indo-Russian strategic 
relations".  Noting this gap, Dr. Unnikrishnan stated that 
the Indian-Russian economic relationship offers the most room 
for growth.  Although it has lagged behind since the end of 
the Soviet Union, he believes both leaders have realized that 
any "strong relationship must have an economic underpinning" 
and that India could assist Russia in agriculture, small 
scale business, IT and the diamond industry.  Putin and Singh 
also reportedly finalized an agreement to aid Moscow's entry 
to the WTO.  According to NSA Narayanan, Petroleum Minister 
Mani Shankar Aiyar will visit Moscow in late May to explore 
opportunities to meet India's skyrocketing energy needs 
through increased investment in the Sakhalin 3 and Kurmangazy 
oil fields.  In the area of space, Putin sought Indian 
assistance in setting up a global navigation "Sputnik" system 
as a rival to the US Global Positioning System. 
 
Comment 
------- 
 
10.  (C) Indo-Russian summits inevitably call up references 
to their historically special relationship, but Russia's 
attitude towards India has changed since Putin's visit last 
December.  After the parade of government leaders that have 
come through Delhi recently, Russia has taken note of India's 
growing number of competing "strategic partners."  It may be, 
as Dr. Unnikrishnan put it, that "the Russian-Indian 
relationship was running into a glass ceiling, which Russia 
wants to transcend."  Putin's proposals on nuclear and 
defense cooperation look like catch-up after recent US 
activity in this area.  India also seems to be using growing 
US-India ties to its advantage with Russia, demonstrated by 
the PM's ability to spin the export control legislation, 
which was primarily drafted to address the requirements for 
the Next Steps in Strategic Partnership (NSSP) and the UNSCR 
1540, to push for greater nuclear cooperation with Russia. 
 
11.  (C) Nonetheless, these good intentions do not portend 
clear sailing.  The IPR agreement is the clearest 
manifestation of the difficulty the GOR and GOI face in 
coming to concrete agreements that accommodate the shifting 
power equation of their relationship.  The three-way meeting 
in Vladivostok is symbolically significant as the three 
countries' first stand-alone meeting, driven in large part by 
their mutual interest in energy.  Putin reportedly remarked 
at the VE meeting that "There are many guests in Moscow, but 
only one India."  From the Delhi standpoint, Putin seems 
increasingly aware that if Russia does not keep up the 
momentum in its ties with New Delhi, then India's attention 
will turn elsewhere. 
 
12.  (C) However, New Delhi's shifting priorities were also 
reflected in the great importance that Indian commentators 
have attached to what we understand was a second-long 
encounter between the PM and President Bush.  For many in New 
Delhi, the President's reported expression of appreciation 
for Indian democracy and his anticipation of a successful 
Manmohan visit to Washington in July was as important as the 
perceived restoration of good vibes around the Indo-Russian 
relationship. 
BLAKE